The U.S. dollar has lost 7 percent of its value against a basket of international currencies but this could prove to be a catalyst for certain stocks, Erin Gibbs, a portfolio manager with S&P Global said during a recent "Trading Nation" segment.
One of the better-positioned sectors to take advantage of the weakness in the greenback is the consumer discretionary sector, Gibbs explained. While the sector as a whole has "average exposure" to international sales when it comes to actual earnings growth the weakness implies "a lot less overhang" moving forward.
"That might be your one safe bet when it comes to a dollar play," she emphasized.
On the other hand, sectors like health care, energy, utilities and real estate have relatively low exposure to foreign revenue, which isn't encouraging for the sectors, Gibbs continued. This is because when companies bring home overseas cash it is able to convert it to U.S. dollars at a better rate.
But investors expecting a rebound in the U.S. dollar are advised not to buy into stocks within those four sectors, as the group is expected to report negative earnings growth. This is especially true for health care stocks, which are simultaneously tackling with ongoing uncertainty from the White House.
"So even if the dollar does better, it's still not looking great," Gibbs added.
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