Over the past 3 years, the dollar is higher vs a basket of major currencies by 21%. According to Factset, about 50% of sales are earned abroad by companies in the S&P 500, compared to just 20% in the Russell. Back in 2015, when the dollar rose by 7% from January through March, the strong dollar wreaked havoc on American multinationals — dinging earnings by about 11%.
Lo and behold, the dollar index is higher by more than 6% since October and markets are celebrating as if the second coming of the dot com bubble had just been announced.
As of right now, the dollar is higher by 0.75% v the euro, +0.21% v the yuan, +1% v the yen and the dollar index is ripping higher by 0.6%. At some point, American multinationals will fess up to the fact that a bubbling higher dollar is scornful for their prospects. Earnings revisions will be made, taking into account the sudden jolt in fx markets and the SPY will reflect that reality.
Until then, however, it doesn’t appear Wall Street is in the least bit interested in disrupting their spiked egg nog induced euphoric feeling, as markets wistfully drift higher on the specter of hope.
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…and ya gotta keep raising your stops on the domestic stocks as well. See #SWFT.
I believe the loss would be worse if their lowered guidance bomb was set off after market hours.
Dollar higher stocks higher
1981-1985
1995-2000
I think I remember seeing late 1920s dollar strength, prior to 1929 top.
Yen higher, Japanese stocks higher
1985-1989
1940 was the last time treasury yields reached such lows and rising yields occurred from 1940-1981.
Not sure if dollar rose at all from 1940-1980 (1978-1980 but inflation wasn’t comparable). Data before 1967 doesn’t seem reliable.
Such conditions seem to represent a global concentration of capital into a specific market.
You had some defaults in the Asian (1997) and Russian (1998) bond markets in the late 90s and capital migrating to the dollar and US stocks, specifically tech into the 2000 bubble.