There’s one major tailwind for the Mag 7 ahead of earnings

Tariffs are set to rise again, with country-specific duties kicking in next month — yet Wall Street remains firmly unbothered.

Major stock indexes notched new highs last week, fueled in part by a strong start to second-quarter earnings season, with 83% of S&P 500 companies beating expectations so far. And one tailwind helping corporate America’s bottom line is the falling US dollar.

An unintended byproduct of the “T word,” a significant amount of demand for the US dollar has evaporated in the last few months, with the DXY — a weighted average of the USD against six global currencies — down 7% since the start of the year.

Perhaps counterintuitively, a lower dollar translates into higher revenue for companies that do a lot of business overseas. In fact, per Goldman Sachs estimates published Friday, every 10% drop in the dollar translates into roughly 2% to 3% gains for S&P 500 earnings per share — and that’s already showing up: last week, companies like 3M, PepsiCo, and Netflix have all attributed their strong Q2 results to favorable foreign exchange.

But the larger beneficiaries could be the tech giants of the Magnificent 7, which Goldman estimates generate 49% of their combined revenue overseas, far above the S&P 500 average of 28%. Alphabet and Tesla are the first two of the Mag 7 set to report Q2 earnings on Wednesday.

Of course, it’s not all upside: any parts or services bought from abroad will be more expensive as well, offsetting some of the benefit. These global companies will also face “above-average risk” if trade tensions escalate further, and while a weaker dollar boosts profits on paper, it can also mask deeper concerns — namely, the reasons that the dollar fell in the first place, such as uncertainty around federal debt and US growth prospects.