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Chart: Falling Dollar, Wages Signal U.S. Stock Gains

U.S. manufacturers are heading for a revival as a lower dollar, falling wages and rising productivity make them more competitive, according to Sean Darby, Jefferies Group Inc.’s chief global equity strategist.

The CHART OF THE DAY captures the criteria, cited in a report yesterday. A trade-weighted dollar index, compiled by the Federal Reserve, appears along with a Labor Department indicator of unit labor costs for manufacturing. The latter gauge reflects compensation as well as output, or productivity.

“Investors forget that it is the unit labor cost that matters,” Darby wrote. Manufacturers are benefiting not only from cost reductions but also from a “currency subsidy” that stems from the Fed’s quantitative easing, or bond buying, the report said.

Technology companies and automakers are in recoveries, in his view. The Hong Kong-based strategist added that agriculture, coal and mining, oil and aerospace companies have expanded at a relatively fast pace since 2005.

“The return of U.S. competitiveness” bodes well for stocks, Darby wrote. He prefers them to Treasury securities, precious metals and commodities, in addition to other equity markets worldwide in dollar terms.

Share prices are most likely to climb as funds flow out of bonds and commodities, the report said. Last year was the fifth consecutive year in which investors withdrew money from equity funds, according to preliminary figures from the Investment Company Institute. They pulled an estimated $132 billion.

To contact the reporter on this story: David Wilson in New York at

To contact the editor responsible for this story: Nick Baker at

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