«…Is Killing Asset Prices.»
Have you pulled up a chart of the U.S. dollar lately? It’s engaged in a gravity defiance campaign of a decade. Nay, two decades. Fueled by ballooning interest rates and a Federal Reserve that promised inflation would come to heel, America’s currency has flown to its highest level in twenty years.
And it has risk assets shaking in their boots. Gold, bonds, stocks, crypto – you name it. They all exhibit a negative correlation to the buck. So if you want the pain to stop, root for the dollar bull to take a rest.
Two other points.
① First, a strong dollar hurts multinational companies because it reduces their profits from sales abroad.
② Second, a strong dollar generally causes U.S. equities to do better than their foreign counterparts. And, sometimes, “do better” means they fall less.
If there’s a silver lining to all this chest-thumping by the increasingly obnoxious U.S. dollar, traveling abroad is getting cheaper by the day.
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