Home Advantage: Will US companies’ high exposure to domestic consumers benefit stock market investors?

US corporations’ excessive publicity to US shoppers ought to be a relative benefit because the US economic system continues to open whereas the remainder of the world lags in vaccinations.

Investing within the US inventory market shouldn’t be with out a purpose. Dwelling to among the high international corporations, the US inventory market supplies a chance for buyers to diversify their portfolio geographically and reap the advantage of equities. With the opening up of the US economic system, the company earnings are anticipated to rise additional on the again of a robust home demand. When you as an investor in US shares need to know the power of the US client in reshaping the company wealth, right here’s a snapshot.

US corporations’ excessive publicity to US shoppers ought to be a relative benefit because the US economic system continues to open whereas the remainder of the world lags in vaccinations and the elimination of pandemic restrictions. These with excessive publicity to non-US shoppers might wrestle; a 30% share of income coming from overseas shoppers may materially impression corporations.

This discovering is a part of the International Publicity Information 2021 by Morgan Stanley Analysis. The report quantifies the income breakdown of corporations within the US, Europe, Japan and EM to totally different geographical areas.

In keeping with the report, the US has the best home publicity inside Developed Markets. The US corporations derive 71% of their revenues domestically, 12% from Europe, 8% from Asia Pacific ex Japan (together with 4% from China) and 4% from Latin America.

Within the US, the biggest sectors by market cap are Software program, Media, Tech {Hardware}, Retailing, Pharma and Well being Care.

Observe: Sector weights as of Could twenty seventh 2021.
Supply: MSCI, Morgan Stanley Analysis

Whereas the primary three sectors every have beneath common home income publicity, Retailing and Well being Care are extremely home with 86% and 84% of revenues derived from throughout the US.

Supply: Morgan Stanley Analysis

In any other case, among the US sectors with the best home publicity – together with Utilities, Telecoms and Business Providers are comparatively small from a market cap perspective (all three account for simply 5% of the market).

US corporations are probably the most extremely uncovered to their home shoppers globally, Japanese corporations the least. US corporations derive 53% of their revenues from shoppers instantly, making them probably the most uncovered globally.

Japanese corporations are the least uncovered with 31% direct client publicity. As an alternative, Japanese corporations are probably the most uncovered to their company spending, which accounts for 67% of revenues. US corporations against this derive solely 37% of their revenues from corporates instantly, making them the least uncovered globally.

For US corporates, roughly 78% of the businesses in our database incur 50% or extra of their prices within the US. The database for the report covers over 3,300 corporations globally, has income publicity knowledge for 17 totally different areas and is compiled by way of an inside survey of 280 Morgan Stanley Analysis analysts.