All-American Profits: 2 Stocks for Your Portfolio
Are you an American investor? Or at least an investor in American companies?
Do you love our country and the freedom that it stands for? Are you proud of our way of life, and our government “of the people, for the people, and by the people?”
Yes, I’ll admit that America has its share of problems. No country is perfect.
But our system of checks and balances is part of why I love this country so much. And our policy of protecting property rights and free markets is a big part of why our country has become so prosperous.
Today, I want to spend a bit of time talking about our free markets… And more importantly, the opportunities that American companies are giving to us as investors in this plentiful season.
The Fed’s Policy Shift Marks a Major Turning Point
I like to think that it’s always a good time to invest in America. Because a free, capitalistic market is by far the best way to generate profits and create wealth for our entire population.
But there are certain times when opportunities are more plentiful than others.
And today’s market environment is one of those times.
A big part of that “season of plenty” ties back to a major shift that the Fed is poised to make.
On Wednesday July 31st, the Federal Reserve will conclude its traditional 2-day meeting on interest rates. And during this meeting, the Fed will do something it hasn’t done in more than 10 years!
At 2:00 EST, the Fed’s decision to cut interest rates will be released.
The last time the Fed actually cut interest rates was in December of 2008, during the worst part of the financial crisis. That series of interest rate cuts helped to pull the United States out of a recessionary period and ultimately back into a season of prosperity.
This time around, lower interest rates has the potential to keep the U.S. economic engine growing, corporate profits expanding, and investment returns marching steadily higher.
But due to the unusual nature of this interest rate cut (typically interest rate cuts only happen during times of economic stress), the benefits will be distributed to American companies and American investors in a bit of a different way.
I want to make sure that you understand how the system is working this time around so you’re able to fully participate in the next wave of wealth generation.
Lower Rates Open a World of Opportunity
Most people intuitively understand how lower interest rates help to boost the U.S. economy.
With lower rates, business can borrow money for new plants, more store locations, or to buy inventory. Individuals get lower rates on mortgages and other loans, helping to free up cash for spending on other things.
And so lower rates certainly help our domestic economy grow at a faster pace.
But lower interest rates here in the U.S. also has a ripple effect around the world. This ripple effect ties back to American companies and makes them much more competitive in the international markets.
Here’s how it works…
Lower American interest rates naturally pressure the value of the U.S. dollar. Since investors can’t get that much interest from their dollar holdings, financial institutions typically move more cash into other currencies. So with lower interest rates, the dollar tends to fall compared to other currencies.
In other words, currencies like the Japanese yen, the euro, and other developed world currencies strengthen. And that’s great news for U.S. businesses that sell their products in international markets.
When customers in other countries have strong currencies, it makes our American goods and services more affordable to consumers in other countries. And that means it is easier and more profitable for American firms to sell the goods and services they produce around the world.
Ultimately, profits generated in overseas markets are brought back home. U.S. investors can profit from American stock prices rising (thanks to higher international profits) and also from bigger dividend payments (thanks again to those international sales).
So while a weak dollar may sound like a bad thing, it actually sets the stage for bigger profits for American companies — and for American investors!
Here’s Where to Start
If you’re looking for reliable American stocks that will benefit from this shift in interest rates (and the resulting weakness in the U.S. dollar), I’ve got two investment ideas for you today.
First, consider shares of Procter & Gamble (PG). This consumer staples company makes all the things consumers buy every single day. Think of products like shaving cream, deodorant, and dish soap. PG sells these products around the world.
And with the value of the U.S. dollar dropping, PG’s international business is looking stronger every day!
Another American company in a very different line of business is Apple Inc. (AAPL).
Apple is famous for its iPhone and MacBook sales around the world. But these days, Apple is transitioning to focus more on subscription services.
With a weak U.S. dollar, these services are even more affordable for international customers. And the profits that Apple generates overseas naturally leads to bigger gains in U.S. dollar terms.
So while these stocks have very different products, both have a giant presence in international markets, and both are home-grown companies from right here in the good old USA.
Over the next few months, we’ll continue to track the opportunities that emerge from the Fed’s shift to cutting interest rates. In the meantime, make sure you’re keeping close tabs on American companies that sell products and services around the world.
Here’s to growing and protecting your wealth!