King Dollar and Stocks


The greenback is getting goosed big time and rates are rising.  A strong dollar is ultimately a good thing, so don’t get your boxers in a twist. Stocks could sell off a bit here though, as the market processes this new normal. Lets face it, we cant financially engineer things forever. Gold has the glide pattern of an anvil.

There are a number of implications embedded in the strength of the greenback.

  • It will help tamp down dollar-denominated commodity prices
  • It will help keep inflation pressures in check
  • It will help make overseas travel more affordable for US citizens
  • It will raise the appeal of owning US assets for foreigners in countries with a weakening currency
  • It will enhance the competitive influence of foreign exporters; and
  • It will weigh on the earnings prospects of US multinational companies (conversely, it will boost earnings prospects for foreign multinational companies

The dollar traded to $121 back in 2002, it now trades at $84 and the chart is bullish for now. That was the normal for the dollar before God created Greenspan, Bernanke and Yellen. It will be interesting to see if it holds or rolls over, but the market can still go higher.

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