USD & Fed Policy
◆ What's Happening
The Federal Reserve has paused after cutting rates three times in H2 2025, bringing the target range to 3.50-3.75%. The January 28 FOMC held steady (10-2 vote, with Miran and Waller dissenting in favor of a cut), and Chair Powell characterized the economy as on "firm footing" with current rates "not restrictive." Markets expect the next cut in June 2026, with roughly 50bps of total easing priced in for the year.
The dollar is in a sustained weakening trend — DXY has fallen from 100+ in November 2025 to ~97, driven by narrowing rate differentials, trade policy uncertainty, and what appears to be an administration comfortable with a weaker dollar for export competitiveness. The January jobs report surprised to the upside (+130K vs +55K expected) but massive BLS revisions revealed 2025 total job gains were only 181K, not the originally reported 584K — the labor market was far weaker than anyone thought.
The wildcard is tariff-driven inflation. Businesses are increasingly passing tariff costs to consumers — JPMorgan estimates the consumer burden could shift from ~80% absorbed by firms to only ~20% absorbed later in 2026. If CPI re-accelerates while growth slows, the Fed faces a stagflationary bind: unable to cut (inflation too high) and unable to hike (economy too fragile). The Kevin Warsh appointment as next Fed Chair adds another variable — he's historically more hawkish than Powell.
📈 Bull Case
Dollar weakness accelerates as Fed cuts resume mid-2026, boosting multinational earnings and commodity prices. Rate-sensitive sectors (REITs, homebuilders, growth tech) rally on cheaper capital. Foreign-revenue companies see 5-8% EPS tailwinds from FX translation. Gold continues its run above $5,000 as real rates decline. Financial sector benefits from steeper yield curve and loan demand recovery.
📉 Bear Case
Tariff pass-through reignites inflation to 3.5%+, forcing the Fed to pause indefinitely or even hike. The dollar strengthens on higher-for-longer rates, crushing commodity prices and EM currencies. Debt-heavy companies face refinancing risk at elevated rates. A stagflationary environment — high inflation, slow growth — is the worst case: no sector benefits, and the Fed's credibility erodes.
◆ Rate & FX Exposure
27 stocks across 3 categories. Tap a category to expand.
📋 Also Impacted — scored for this event but uncategorized
International revenue benefits from weaker dollar. At 21x PE, moderate sensitivity. $55B cash buffer. Semiconductor demand is structural, not rate-driven.
Zero debt, $4.6B cash. Rate changes minimal direct impact. Weaker dollar mild positive for international expansion.
Some international revenue benefits from weaker dollar. At 20x PE, moderate rate sensitivity.
Zero debt, $5.5B cash. Pristine balance sheet insulated from rate changes. Some international revenue benefits from weaker dollar. At 40x PE, growth multiple exposed but fundamentals offset.
Some international revenue. At 23x PE, moderate rate sensitivity.
International revenue benefits from weaker dollar. Memory pricing is cyclical and somewhat rate-insensitive. At 10x PE, limited valuation compression risk.
Government contracts provide revenue stability regardless of rate environment. At 12x PE, minimal rate sensitivity. Not capital-intensive.
At 8x PE, very rate-insensitive. NAND pricing is cyclical and commodity-driven, not rate-driven. Some international revenue benefits from weaker dollar.
At 9x PE, very rate-insensitive. US manufacturing base limits FX exposure. Backlog provides revenue visibility.
VMware recurring revenue adds rate stability. $72B debt is significant but covered by $19.4B FCF. At 23x PE, moderate rate sensitivity.
🛡️ At Risk — negative exposure to this event
REITs are the most rate-sensitive sector. Higher rates increase financing costs for DC development and reduce REIT yield attractiveness vs bonds. 2.8% dividend yield competes with 4%+ bond yields.
$12.9B debt, deeply unprofitable. Highest rate sensitivity in AI universe. Higher rates crush ability to finance GPU fleet expansion.
At 152x PE, most rate-sensitive large-cap in our universe. Higher rates crush speculative growth multiples. Auto loans sensitive to interest rates. Musk/DOGE political ties add complexity.
At 49x PE with thin profitability, extremely rate sensitive. $1.2B debt with -$150M FCF. Higher rates crush ability to finance growth and compress speculative multiples.
REIT — highly rate-sensitive. Higher rates increase development costs and reduce yield attractiveness. 2.2% dividend yield vs 4%+ bonds. At 54x PE, extreme rate sensitivity.
At 58x PE, one of the most rate-sensitive stocks in our universe. UK-based with global licensing revenue. Higher rates crush high-multiple growth stocks hardest.
Unprofitable with deeply negative PE. Highly rate-sensitive speculative stock. $800M debt with -$3B FCF. Higher rates make capital-intensive GPU fleet expansion more expensive.
$48B debt with -$15B FCF. Extremely rate-sensitive — higher rates make the capex-heavy fab buildout more expensive. Needs cheap capital to fund turnaround.
Capital-intensive utility business. Rate-sensitive — higher rates increase cost of financing massive renewable build-out. 2.5% dividend yield competes with bond yields.
Residential solar demand is highly rate-sensitive — higher mortgage rates = fewer home solar installations. At 16x PE, less exposed than peak, but consumer financing is critical.
Pre-revenue speculative stock. Most rate-sensitive category — higher rates devastate valuations at 308x P/S.
Capital-intensive utility with $8.5B debt. Higher rates increase financing costs for TMI restart and capacity expansion.
$5.8B debt at 33x PE. Higher rates increase financing costs and compress growth multiple. International revenue provides some FX offset from weaker dollar.
Pre-revenue company burning cash. Higher rates crush speculative valuations. Needs capital markets access to fund development.
Pre-revenue company. Higher rates crush speculative valuations. Cash burn requires continued capital market access.
Capital-intensive regulated utility. $60B+ debt is massive. Higher rates increase financing costs. 3.3% dividend yield competes with bond yields.
$22B debt is heavy for a hardware company. Higher rates increase financing costs. At 10x PE, stock is already discounting margin pressure.
Capital-intensive utility with $12.4B debt. Higher rates increase financing costs. At 18x PE, moderate rate sensitivity.
At 40x PE, high rate sensitivity. Zero debt and $680M cash help, but growth multiple compresses with higher rates.
$42.3B debt is significant. Higher rates increase financing costs. Commercial aerospace segment sensitive to economic cycle.
Pre-revenue growth stock. Higher rates compress speculative valuations hardest. Cash burn accelerates at higher borrowing costs.
$30B debt is very high. At 17x PE, less multiple compression risk than growth stocks, but debt servicing costs matter. Some international revenue benefits from weaker dollar.
$12B debt with $5B/yr fab capex. At 29x PE with -2% revenue growth, rate-sensitive. New fab buildout needs cheap capital.
At 42x PE, high rate sensitivity. $8B+ debt for an E&C company. Higher rates slow infrastructure project approvals.
At 30x PE, moderate rate sensitivity. $580M debt manageable but growth multiple compresses with higher rates.
Micro-cap at 33x PE. Small stocks most vulnerable to rate-driven multiple compression.
$2.8B debt at 24x PE. Growth multiple compresses with higher rates. International revenue provides some FX offset.
At 30x PE, moderate rate sensitivity. $420M debt manageable. International revenue provides some FX benefit from weaker dollar.
Defense spending largely insulated from rates. $19.2B debt but stable cash flows cover it. Weaker dollar mild negative for foreign procurement costs.
Moderate debt. Capex-intensive fab operations benefit from lower rates. Not heavily leveraged.
$6B debt at 22x PE. HDD demand somewhat cyclical. International revenue from weaker dollar is a minor positive.
$1B debt at 21x PE. Manufacturing in Asia means FX impact is mixed — weaker dollar helps US revenue but raises Asian manufacturing costs.
Israel-based, USD-denominated revenue. Dollar strength/weakness has mixed effects. At 48x PE, some rate sensitivity.
At 30x PE, some rate sensitivity but zero debt and strong growth offset concerns.
At 10x PE, relatively rate-insensitive. $2.8B debt manageable given revenue scale. Thin margins mean any cost increase matters.
◆ Catalyst Calendar
💡 Cross-Event Note
Dollar weakness directly amplifies the AI capex trade — hyperscalers spending $690B are importing equipment and materials globally, so a weaker dollar raises their costs. For Iran, dollar weakness typically pushes oil and gold higher, reinforcing the geopolitical hedge. The Supreme Court tariff ruling (expected after Feb 20) is the biggest cross-event catalyst: if tariffs are struck down, the dollar could spike on deficit concerns while the China trade war narrative shifts dramatically.