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Caution! A strong dollar and a 'bull market' in U.S. stocks may not coexist
Ned Davis Research analysts warned in a report last Friday that stock market investors need to closely monitor the dollar's movement, as history shows that a persistently strong dollar may hinder further gains in the stock market.
Currently, the strong dollar seems to be taking a breather, ending an eight-week streak of gains. The dollar has been rising throughout the fall due to soaring U.S. Treasury yields, reflecting strong economic data and concerns that the incoming Trump administration's trade agenda and fiscal plans may exacerbate inflation worries, thereby limiting the Federal Reserve's ability to further cut interest rates. The dollar's rise also reflects market expectations that these policies will boost the economy, allowing the U.S. to continue outperforming other countries.
Currently, the strong dollar seems to be taking a breather, ending an eight-week streak of gains. The dollar has been rising throughout the fall due to soaring U.S. Treasury yields, reflecting strong economic data and concerns that the incoming Trump administration's trade agenda and fiscal plans may exacerbate inflation worries, thereby limiting the Federal Reserve's ability to further cut interest rates. The dollar's rise also reflects market expectations that these policies will boost the economy, allowing the U.S. to continue outperforming other countries.
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