With 2025 having just begun, the U.S. dollar has already emerged as the topic du jour for the new year. The greenback has strengthened in value over the last few months, spurred by President-elect Donald Trump’s proposed economic tariffs. Since the November election, the U.S. dollar index — which measures the U.S. currency against a basket of similar currencies — has gained more than 6% through Monday’s close. Morgan Stanley chief U.S. equity strategist Michael Wilson expects an uptick in currency headwind mentions this earnings season, especially for stocks with a higher degree of exposure to overseas markets. “That said, dollar strength is likely less of a determinant of earnings results at the index level and more of a factor at the stock level given the fact that foreign sales exposure varies widely across the index,” he said. “Bottom line, a stronger dollar is typically not a key variable in terms of explaining index [earnings per share] growth/performance over time though it can be an important factor for stocks with high foreign revenue exposure.” To hedge against this potential headwind, Wilson said he favors stocks with “relatively low foreign sales exposure and low sensitivity to a stronger dollar from an EPS growth standpoint.” “This cohort has begun to outperform on a relative basis since the dollar started to strengthen in October, and we see outperformance continuing as earnings season progresses,” the strategist wrote. In the note, Morgan Stanley provided a list of names that fit this criteria. To be included in the following table, stocks had to meet the following requirements: Be a member of the S & P 1500 Be assigned an overweight rating from Morgan Stanley Have a foreign revenue exposure of less than 15% Have next-twelve-month earnings per share with minimal sensitivity to a rise in the dollar index One name on the list was pet retailer Chewy . Shares have added 87% over the past 12 months as of Monday’s close. Evercore ISI agreed with Morgan Stanley’s bullish stance. On Sunday, Evercore ISI analyst Mark Mahaney upgraded the stock to an outperform rating from in line. “We believe the Pet Industry has largely stabilized, and CHWY is well-positioned to grow in line or better in a potential market recovery,” he wrote. “Recent industry data, combined with CHWY specific initiatives and future product catalysts, support our constructive view of CHWY’s ability to accelerate growth in FY′25 and sustain durable revenue growth, active user growth, and margin expansion over the next few years.” Nineteen out of 31 analysts polled by LSEG rate the stock a buy or strong buy, and consensus price targets see upside of more than 2%. Within the communication services sector, Morgan Stanley highlighted AT & T as another attractive stock. Shares of the telecom giant are up more than 30% over the past year through Monday. Earlier this month, Deutsche Bank reiterated the stock as a buy and said it was a top pick for the new year . Similarly, RBC upgraded shares of AT & T to overweight from sector weight, citing “greater confidence in growth initiatives and shareholder return prospects.” Seventeen of the 29 analysts following AT & T rate it buy or strong buy, and consensus price targets suggest upside of 16%, per LSEG. Another stock that made Morgan Stanley’s list was Northrop Grumman . The aerospace and defense stock is down nearly 2% over the past 12 months as of Monday. Last week, Wells Fargo upgraded shares of Northrop Grumman to overweight from equal weight, citing the company’s attractive defense portfolio. “NOC supplied less material to Ukraine vs peers, and should be less impacted as the conflict hopefully draws to a close. [Free cash flow] likely doubles through 2028 on lower investment, better pension and less [research and development] tax hit,” Wells Fargo wrote. Twelve of 25 analysts polled by LSEG rate the name a buy or strong buy, and consensus price targets call for 16% upside. Other names that made Morgan Stanley’s list include Home Depot and UnitedHealth Group .
