It's the Dollar Stupid
And sure it makes me look smart, but that's not what I'm here for.
In fact, you don't even need to be that smart.
When the Dollar goes up, stocks don't. When the Dollar goes down, stocks really like it a lot.
Do you see how with the Dollar selling off even a little tiny bit, the Dow is already just 7% from new all-time highs?
And think about this, the impact the Dollar is having on stocks is even more egregious when you look internationally.
Remember, over the weekend we talked about the fact that the list of sectors in uptrends continues to get longer, not shorter.
When you price all the stock markets around the world in their local currencies, you're seeing the exact same phenomenon: Breadth Improvement!
In bear markets you see breadth deterioration, obviously. But what we've seen the past 5 months has been the exact opposite of that.
Look at the difference between the % of stock markets around the world that are above their 200 day moving average when priced in local currency vs being priced in US Dollars:
The strength is certainly there underneath the surface, in the same ways that we're seeing the majority of stocks going UP since June, not down...
The Euro & British Pounds bottomed in September. Combined they represent 70% of the US Dollar Index. Stocks have had one of their strongest periods in American history during that time.
So just imagine what stocks do if the Dollar has a real correction...
Something like 2017?
Or the back 3 quarters of 2020?
And it won't just be US Stocks doing well. We're looking for rotation internationally in that environment.
Are you fighting these trends?
Please chime in. Let me know why!
We've been buying stocks. And it's paying off very well.
Are you doing something differently? How come?
- JC