The impact of a stronger US dollar means mega cap margins are at risk because they tend to earn more of their revenues abroad. We would be cautious about companies that benefited from the weaker dollar during the ‘90s and ‘00s because the inverse will be true in a stronger dollar environment. On saying that, generally when a currency appreciates the stock market valuation in that country goes up. We would expect to see relative earnings of US companies versus the rest of the world weaken but this will be seen mainly at the larger end of the market cap spectrum, whereas smaller caps are due to have a good earnings season. Weaker revenue growth could see downward pressure on earnings from the S&P 500 overall this year but that doesn’t mean it will be true across the board. Financials, technology and healthcare are sectors we are confident of seeing positive earnings growth from in 2015. In this type of environment not everybody wins, but that is when the case for active management is most compelling.
Dave Daglio – The Boston Company Asset Management, A BNY Mellon company