Result Season Isn't About The U.S. Economy, But The Impact Of The Rising Dollar

The U.S. dollar has seen a tremendous rise in the last couple of months, causing significant impact on the top line and bottom line of multinational corporations (MNCs) who derive most of their revenue from outside the U.S.

However, are investors willing to give that a pass and show confidence in companies whose fundamentals are on the right track?

David Rosenberg, chief economist for Gluskin Sheff, was on CNBC recently to answer that question.

State Of The Economy

Rosenberg was asked if the recent results declared by big multinationals tells anything about the state of the U.S. economy. He replied, "Well, I think that it's not telling you much about the strength of the U.S. economy. It's really telling you if there's problems that it relates more to what the U.S. dollar has been doing to the large-cap companies that are very export oriented."

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He continued, "First quarter we know was soft for a bunch of transitory reasons, as was the case last year, but the earnings right now really – when you take a look at the domestic sectors of the economy; you strip out the impact of oil – the earnings really aren't that bad at all."

Currency Impact To Continue

On whether investors are willing to give a pass to companies that can post underlying strength despite the headwind of the currency, Rosenberg said, "I think that we still haven't seen the full impact of what the currency has done. I mean, it was up 20 percent trade weighted in a short period of time, and the impact of the dollar on earnings is a lagged impact."

He explained, "So, this is going to continue for the next few quarters. I think that one of the reasons why you might want to look through it is that the U.S. dollar is not going to be a hockey stick going straight up to perpetuity.

"At some point, it is going to level off. So, this is more temporary in my opinion than permanent," Rosenberg concluded.