Shares of companies that do more business overseas are significantly underperforming domestic firms as the US dollar surges to 20-year highs, Goldman Sachs says

• Shares of companies with big overseas sales are trailing domestic-focused firms, according to Goldman Sachs.
• A basket of stocks of domestic focused companies was outperforming firms with overseas tilt by nine percentage points.

Stocks across Wall Street have been hammered into a bear market this year, but those of companies that derive the bulk of their sales outside of the US have trailed those of companies that are domestically oriented, Goldman Sachs said this week.

The slump in the S&P 500 and the Nasdaq Composite has pushed the major indexes down by more than 20% in 2022, with the tech-rich Nasdaq sitting on a loss of 26%.

Analysis from Goldman Sachs published Friday showed the pain of stock losses has been particularly sharp for companies with a heavy amount of international sales. The investment bank said a basket of stocks it tracks with high domestic sales exposure has outperformed a basket of multinational stocks by nine percentage points this year.

That leaves the international basket down by 24%, wider than the 15% decline in the domestic bunch. Goldman's international sales and domestic sales baskets each hold 50 S&P 500 stocks with the greatest share of non-US and domestic revenues.

Foreign sales in 2021 accounted for 29% of the $14 trillion of aggregate S&P 500 revenues, compared with 28% in 2020.

What's helped provide upside support for US-focused companies is the climb in the trade-weighted US dollar's value, Goldman said.

The US Dollar Index, which measures the greenback's performance against six other currencies, this year has soared to fresh 20-year highs above the 105 level. But dollar strength can hurt multinational companies in part as it makes their products more expensive for holders of other currencies to purchase.

What's also put pressure on the multinationals basket is the Information Technology sector as it rakes in 59% of its revenue from overseas. Tech stocks have plunged as the climb in interest rates can lead to chipped prospects for future profit. The materials sector is the only other one that makes most of its revenue from overseas, at 50%.

The largest region of non-US exposure was Asia Pacific at 9%, or $1 trillion, followed by Europe at 6%, or $846 billion. But only 3%, or $370 billion, of S&P 500 revenues were explicitly from Greater China, said Goldman, which conducted its analysis on recent 10-K annual corporate filings.

On a regional basis, it said Monolithic Power, Qualcomm and Las Vegas Sands were the companies with the largest revenue exposure to Greater China. In Greater Europe, the list was topped by travel services company Bookings and gold miner Newmont.

APA, the parent firm of oil and gas company Apache, and American Tower, a REIT, has the greatest exposure to sales in Africa and the Middle East.