The Federal Rserve has raised its benchmark lending rate by three percentage points so far this year. Higher interest rates lead to a stronger US dollar, which is likely to add to global economic pressure and weigh on corporate profits, economists at Charles Schwab report.
Companies could be looking at a difficult start to next year
“An excessively strong dollar can cause an earnings recession – especially when the macroeconomic backdrop is overshadowed by the Fed's aggressive tightening policy, pessimism among consumers and businesses, and a significant slowdown in leading economic indicators.”
“The strong dollar will probably hit earnings eventually. Foreign exchange difficulties often take a while to fully translate into weaker profits. That means companies could be looking at a difficult start to next year.”
