VIDEO: Change for U.S. Dollar Is an Overlooked Tailwind

In today’s Portfolio video, Chris Versace explains what we’ll be looking for in Tuesday's July Durable Orders data and why we’ll be interested in company investor conference comments about the dollar. 

As Chris explains, while many are focused on tariffs, the year-over-year decline in the dollar is a potential tailwind for U.S. exports. We also share how we’re going to navigate President Trump’s latest action against the Fed, and why Klarna’s renewed IPO efforts could reinvigorate the IPO market.

Transcript

CHRIS VERSACE: Hey, everyone, Chris Versace. It is Tuesday, August 26th. And we've got another modest morning of earnings and a few pieces of economic data coming at us, including the July Durable Orders data. Now, this is a report that we are going to want to dig into just a little bit today.

And I say that because when we saw the flash August PMI report, for manufacturing in particular last week, we did notice an uptick in activity, with the comment being that manufacturers needed to restock inventories after having run them down. And our question was, hmm, how much of this is true demand? And we'll talk a little more about that in a second. But how much of that is the restocking effort?

So what's the balance in that big uptick that we saw in the flash manufacturing PMI, again, for August. So with that in mind, we're going to want to dig a little bit into the July Durable Goods order report. And when we do so, we have to remember that durable orders, generally speaking on a monthly basis, they can be a little volatile, largely because of the transportation line items.

So when we move through the July report today, we're going to want to really delineate very carefully, stripping out transportation, stripping out defense durable orders, and really focusing in on a particular line item, non-defense, non-aircraft orders, which is a proxy for capital spending. So as we think about that, that'll give us some clue of, are we seeing the early signs of a pickup in the manufacturing economy that flows through to that August PMI report?

And as I mentioned, we've got some other earnings this morning as well. But I will say that I do think that, given the lack of market moving earnings this morning, by and large, today is going to be driven by conversation that will be fueled by the talking heads. And of course, I'm referring to President Trump moving to oust Fed Governor Cook, and her position that the President has simply no authority to fire her.

This is going to go back and forth. But I think we can all agree that this is just the latest attack by Trump on the Fed. And I think we can also agree that it's going to reintroduce some near-term uncertainty into the market, less than what we saw a few weeks ago when Trump went after Powell, but just renewed questions about the Fed's independence, the path forward for monetary policy. And you know that we will continue to follow the data.

We don't get political when we're managing the portfolio. But I will just say this. Given what's being put forth and the conversation around it, boy, wouldn't it be interesting if a similar spotlight was put on all the members of Congress? That's all I'm going to say. And with that said, we will navigate these developments, ongoing developments, I should say, between Trump and the Fed. And we will continue to manage things accordingly.

With that said, let's move on. As you know, we remain on the hunt for some fresh blood for the portfolio as we get ready to transition through the balance of August and September for the seasonally strong period that is October, November, and December in the markets. We talked about that yesterday. What this means, we will continue to connect dots, assess opportunity, as well as risk.

And that includes something I want to talk about regarding this upcoming wave of investor conferences. We talked a little bit about them yesterday, why we want to pay attention to what they have to say about demand, tariffs, and margins, and earnings expectations for the back half of the year. But we also want to pay attention to what these management teams have to say about the dollar.

And I say that because, if we look at a chart of the dollar, it really slid in the first half of the year. And now it's back to levels that we really haven't seen since the first half of 2022. And remember, a weaker dollar tends to be good for exports. So at a time when many are focused on the impact of tariffs, I think that the move lower on a year over year basis in the dollar could very well be a tailwind for US exports.

So we're going to listen to those. So, excuse me. We're going to add that to our list of things to listen to for this week, and in the investor conferences that we have in early September, really as we gear towards refreshing expectations for the second half of the year.

Now, yesterday, we also talked about the expected pickup in investment banking activity. We talked about an M&A deal there. But today, we have another fresh data point. Apparently, Swedish fin-tech company Klarna has said that it will restart its plans to go public in the US next month with a valuation between $13 and $14 billion.

Here's where it gets interesting for us. Per the March filings from Klarna, Goldman Sachs, JP Morgan, and Morgan Stanley will be co-running the offering. Now, that's another positive data point, potentially. We'll have to see how the transaction prices. But we also talked yesterday about a number of other high profile IPOs that are slated to come to market after the Labor Day holiday weekend. Obviously, we are going to want to see if positive momentum begets positive momentum in the IPO space.

And as that happens, we will continue to revisit our price targets for Morgan Stanley and Bank of America. We'll also continue to watch for IPO filings for companies that are in the investment portfolio of SuRo Capital. So, a lot more coming on that front. We remain vigilant. And again, as we see the picture coalesce and firm, we will revisit some of those price targets.

Finally, just after today's market close, we do have quarterly results from PVH. That's a retail company of sorts. And it's going to be a preamble for what we're likely to hear from Abercrombie and Kohl's tomorrow. We also have Okta reporting after the market close. That's kind of interesting to me.

I'd be curious to see what they have to say about spending on identity management, and how that fits into our cybersecurity, data privacy investment theme. So folks, like we said yesterday, it may be the last week of August. But make no mistake. For the portfolio, it's going to be a busy one. And remember that after Wednesday's market close, we have quarterly results from NVIDIA, Thursday, Marvell, Friday, the July PCE price index as we round out the month.

So, my friends, be sure to check your emails, your alerts. We've got a lot coming at you. We want to make sure you get our latest thoughts. And if we happen to make any moves with the portfolio, you know it. We want to make sure you are right there with us. Thanks for watching.