QUESTION:
How are bond yields and the U.S. dollar affecting large-cap multinationals and dividend-paying stocks?
RESPONSE:
The current financial environment, characterized by rising bond yields and a weakening U.S. dollar, is impacting large-cap multinationals and dividend-paying stocks in several ways:
1. Large-Cap Multinationals: The weakening U.S. dollar can be beneficial for large-cap multinationals as it makes their products and services cheaper and more competitive in foreign markets. This can potentially boost their revenues when converted back to dollars. However, the rising bond yields indicate higher borrowing costs, which could negatively impact companies with significant debt or those needing to raise capital[1][2][3].
2. Dividend-Paying Stocks: Dividend-paying stocks might become more attractive to investors in a volatile market. As both stock and bond markets experience sharp spikes in volatility, investors may seek the relative stability and income provided by dividend stocks. This is especially true as these stocks can serve as a middle ground between equities growth and yield, appealing to a broader group of investors during uncertain times[4].
Overall, while the weakening dollar might provide some advantages to multinationals, the rising bond yields could pose challenges, particularly in terms of increased financing costs. Meanwhile, dividend-paying stocks may see increased interest from investors looking for stability and income in a volatile market environment.
References
[1] How Merging CFO And COO Can Lead To A More Unified Company [Forbes]
On Monday , the major indexes were all down—the Dow closed down 2.5%, the S&P 500 declined 2.4% and the Nasdaq fell 2.6% Yields for longer-term bonds also spiked, putting the 10-year Treasury note at 4.4%, and the dollar fell to its weakest level compared to other major currencies since March 2022.
[2] Trump’s First 100 Days Fuels An Economic Debate: Strategy Or Chaos [Forbes]
New School economist William Millberg (my colleague), points out the dollar is falling in value while Treasury bond yields are rising, an unusual combination that signals a lack of investor confidence in US assets generally and an increased risk of a run on the dollar.
[3] Is The U.S. Staring Down Another Rating Downgrade? [Forbes]
As investors dump U.S. assets in favor of foreign alternatives, stocks have suffered losses, bond yields have risen and the dollar has weakened.
[4] Why dividend income may have its day in uncertain stock and bond market [CNBC]
But now, as the stock and bond markets both see sharp spikes in volatility, dividend stocks may appeal to an even wider group of investors, playing more of a role in-between equities growth and yield.
https://www.cnbc.com/2025/04/27/why-dividend-stocks-bonds-volatile-market.html