Foreign sales as a share of S&P 500 companies' total revenues fell in 2019 to its lowest level in 10 years, Goldman Sachs said in a report as it warned of downside risks for U.S. stocks with high sales exposure to China amid rising political tensions.
Goldman Sachs said foreign sales accounted for 29% of the $12 trillion aggregate S&P 500 revenues in 2019, down from 30% in 2018. About 12% of revenues were derived from Europe, Middle East, and Africa, while 9% of sales were sourced from the Asia-Pacific region. Two percent of revenues stemmed from Canada and Mexico combined.
Only 2% of revenues came specifically from Greater China, which includes Hong Kong and Taiwan, while Japan accounted for 1%.
Over the past 10 years, the rise in sales exposure of S&P 500 companies to the Asia-Pacific region mirrored the decline in their direct sales exposure to Europe, Goldman Sachs said. Greater China drove 40% of the increase in reported Asia-Pacific sales.
Since mid-March, a basket of U.S. stocks with high sales exposure to China has outperformed the S&P 500 by 15 percentage points, suggesting that investors have so far brushed off the issues troubling U.S.-China relations as they are more focused on China's economic outlook and recovery, according to Goldman Sachs.
"However, we expect increased U.S.-China tensions will weigh on stocks with high China exposure during the next few months," wrote Goldman Sachs equity strategists led by David Kostin, citing key downside risks such as potential legislation on investment restrictions, technological decoupling and tariffs ahead of the U.S. presidential election.
In 2019, information technology was the only S&P 500 sector deriving a majority of its revenues from outside the U.S. at 57%. Semiconductors and semiconductor equipment companies were the most exposed, obtaining 78% of their revenues from overseas.
Materials and energy companies generated 50% and 39%, respectively, of their total revenues outside the U.S. in 2019, Goldman Sachs said.