""Globalization" has become a dirty word".
"Americans associate it with jobs being shipped overseas, falling wages and living standards, and the unsettling rise of China as a world power. But there are upsides to globalization too, even if they're less apparent. The cost of many consumer goods, for example—think most of the stuff at Wal-Mart—has stayed low or gone down in recent years, thanks largely to cheap imports from Asia and other low-cost manufacturing regions.
Globalization has also been an enormous boon for some of the biggest names in corporate America, along with investors who own the stocks and even some of the people who work for those companies. Big U.S. firms—often called "multinationals," for good reason—have increasingly followed global growth, with about 40 percent of profit for firms listed in the S&P 500 stock index now coming from overseas. Foreign exposure allows U.S.-based companies to capitalize on rapid growth in emerging markets like China, India, and Latin America, and earn much stronger profits than if they were totally dependent on the struggling U.S. economy.
That's one reason the stock market has generally been strong over the last two years, despite lackluster growth in the big economies of the United States and Europe. "The S&P 500 is not U.S. GDP," says David Bianco, head of U.S. equity strategy for Bank of America Merrill Lynch. "The S&P 500 continues to outgrow the U.S. economy. Earnings power is decoupled from U.S. GDP." That decoupling is why he and many other analysts expect the S&P 500 to resume its upward momentum later this year, despite a slowdown in the U.S. and European economies.
It's true that some U.S. multinationals hire cheap foreign workers instead of Americans, and keep certain profits overseas to avoid paying U.S. taxes on them. But they also sell their goods and services in global markets that would be dominated by foreign competitors if the American firms weren't there. To explore the extent to which U.S. firms depend on foreign sales, I reviewed information supplied by data and analytics firm Capital IQ, showing foreign sales for all the S&P 500 firms that report such figures. The data show that for most big U.S. firms, foreign sales are a significant portion of total revenues, while firms with little or no foreign revenue are the exception. To highlight the importance of foreign sales, I used Capital IQ's data to provide snapshots of the leading U.S. firms in 15 industries. Here's how foreign sales contribute to overall revenue at 15 well-known American companies"............READ MORE
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