Inverse US dollar guiding global stock markets

Global stock markets are inversely correlated with the US dollar over the last year

While there are some areas that could get a Goldilocks bid under the right circumstances (including a strong US dollar), global stock markets as a whole are not one of them. This chart flips Uncle Buck over to his inverse self and tracks global stock markets (as represented by DJW) pretty darn well over the last year.

So it will be important to determine what this US dollar rally is and if it is just a bear rally (that is all I am reading into it now, even as we planned for it and have a higher target in the short-term) there would come a time to once again favor global over US, on a relative basis at least. But for now, global stock markets (on balance) are doing what the correlation says they should do.

inverse US dollar and the DJW global stock market index

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This Post Has 4 Comments

  1. Meredith C

    So does the index $DJW above include the US or is it global, ex-US?
    Couldn’t find a definite answer with a websearch, but it looks like the US is included.
    For the above correlation though, I would expect that global ex-US would be the correct index to use.

    1. Gary

      You caught me being lazy. I found this chart from years ago in an NFTRH chart list and just left it as is (w/ DJW). ACWX would be an appropriate ETF to make it ‘ex-US’, and yes, its correlation is even tighter. I left this chart as is because it makes the general point well enough.

  2. Anonymous

    The dollar seems like it correlates with almost everything. With the economy holding up better than expected, it allows the Fed to continue to hawk. Rates drifting higher. Dollar drifting higher. Given those circumstances it’s hard for anything to rally right now.

    1. Gary

      That’s why I call Uncle Buck the anti-market. As the global reserve currency (in the face of all those “death of the dollar” cultists) it acts as a linchpin, a counter-party to global (often but not always including US) asset markets. The Fed is heavy handedly trying to reel in the inflation it created by tanking asset prices, which is another way of saying putting people into dollars (and paying them interest to be in those dollars).

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