Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Portfolio > Economy & Markets > Stocks

Why A Weaker Dollar, Stronger Stocks Go Together (For Now)

Your article was successfully shared with the contacts you provided.

Although there is no historical relationship between the dollar and the direction of stocks, these two assets have recently been moving in opposite directions. So what gives?

It’s likely that concern regarding economic growth is driving this relationship. As long as commodity prices rise, the dollar likely falls, as the so-called “commodity” currencies (the Aussie and Canadian dollars, emerging markets) will benefit as raw material prices increase. As global demand  grows, the economic outlook gets sunnier and stocks tend to rise.

Inflation worries mayend this inverse relationship. If the dollar continues to fall, consumer prices for imported goods will obviously rise, potentially hampering the recovery.

As I’ve said in earlier posts, we may be near an inflection point for the dollar. If we get some sort of viable plan to eliminate U.S. debt and the dollar rallies, stocks may potentially go in the same direction – which would represent a new leg up for the bull market.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.