The appreciating U.S. dollar is taking its toll on larger companies’ revenue with significant overseas exposure. On the other hand, mid- and small-cap exchange traded funds track companies that expand with the growing U.S. economy.
After companies like Procter & Gamble (NYSE: PG) and Pfizer (NYSE: PFE) announced disappointing earnings results due the stronger greenback and its effect on overseas sales, the markets pulled back, but the slide in mid- and small-cap ETFs was less pronounced than large-caps.
On Tuesday, the iShares Russell 2000 ETF (NYSEArca: IWM) dipped 0.2%, Vanguard Small Cap ETF (NYSEArca: VB) was down 0.3% and WisdomTree SmallCap Dividend Fund (NYSEArca: DES) was 0.3% lower. [Smart-Beta, Small-Cap ETFs Could Outperform]
Meanwhile, the iShares Core S&P Mid-Cap ETF (NYSEArca: IJH) fell 0.5%, SPDR S&P MidCap 400 ETF (NYSEArca: MDY) decreased 0.5% and Vanguard Mid-Cap ETF (NYSEArca: VO) declined 0.4% on Tuesday. [An ETF to Capture Middle-Capitalization Companies]
In contrast, the SPDR S&P 500 ETF (NYSEArca: SPY) retreated 0.9%.
On Tuesday, P&G’s Chief Executive Officer A.G. Lafley argued that the “unprecedented” foreign-exchange rate fluctuations diminished sales by 5 percentage points, which caused profits to miss analysts’ estimates for the quarter ended Dec. 31, reports Cecile Daurat for Bloomberg.
DuPont, Pfizer and Bristol-Myers Squibb (NYSE: BMY) also announced annual forecasts that missed predictions, partly due to the stronger USD.