Insights | The Russell 1000 Pure Domestic Exposure Index: Targeted exposure to US economic growth

The economic outlook for the US is looking up. Since the Global Financial Crisis (GFC), the US economy has maintained steady, if not spectacular, growth with low inflation, low unemployment and low interest rates. The performance of foreign economies has been more mixed. As shown in Table 1, the most recent forecasts by the Organisation for Economic Cooperation and Development (OECD) suggest that the US economy will continue to outpace most of the developed world.

real gdp forecasts

Furthermore, there are ongoing efforts in Washington to lower corporate tax rates, reduce regulatory hurdles and costs, and finance infrastructure investment — all with the potential of positively impacting bottom lines of US- focused companies.

As well, the Federal Reserve plans to steadily increase interest rates while other central banks do not have such plans for the near future. This will make US interest-bearing securities more attractive to foreign investors. All else equal, the inflow of foreign capital tends to strengthen the dollar against foreign currencies. So the appreciation of the dollar going forward is a distinct possibility. This could negatively impact the value of US company earnings from overseas that are brought back into the US.

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