Should you be worried about the rising U.S. Dollar?


The U.S. Dollar Index has been going up over the past 5 months, driven higher by Trump’s trade war.
This has some stock market traders worried, because economic theory states that “a rising U.S. Dollar is bad for the economy and stock market”.

I demonstrated last year that a rising U.S. Dollar isn’t consistently bearish for the U.S. stock market. We can look at this from another angle.
The U.S. Dollar’s year-over-year rate of change has exceeded 4% for the first time in 1 year.

Historically, the U.S. Dollar’s forward returns are mostly random.

But on a more interesting note, the S&P 500’s medium-long term returns (6+ months) are actually consistently bullish when the USD goes up!

Conclusion

There are several things that medium-long term traders should worry about: namely, the fact that it’s hard for the U.S. economy to get much better. However, a rising U.S. Dollar isn’t one of those worries.
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6 comments add yours

  1. Hey Troy, for quite a bit you were saying $ is in a bear market. Do you still think it’s the case?

    • Hi Jaroslaw,
      No I don’t. I was wrong on that. Now, I think the U.S. Dollar will remain range bound. More importantly, I’m trying to not make predictions about the USD, a market that I wasn’t very good at predicting in the first place.

  2. Hi Troy,
    Another really good article mate.
    It’s very enlightening (& empowering) to see you do a study each time someone makes a “claim” about market impact/effect. This one on the USD I find particularly interesting! 😉

    • That’s the idea. Don’t take “claims” and opinions at face value. Always look at the data.

  3. Hey Troy,
    Just found your website. Wow, you are good.
    I’m in full agreement with you on the Stock Market. Top in 2019. Second half.
    When I see the ES or the S&P 500 at 3200- 3600 then to me its the top. Could have parabolic top to 5,000 like NQ in 1999/2000, but I doubt it
    Silver ( SI) should pop to $16-17 by December 2018- March 2019. Expecting a low of $13.42 area on futures in the next month or three. They taking it down very slowly. NO volatility. After this spike or move in 3 months ( Dec 2018-March 2019) to the $16-17 area I see a low of $7.77 in 2019-2020 before we move to very high prices from 2020-2034. GC low $750 area.
    SI target is $120-180 ( 2021-2023) and $999 or 1,200 an ounce by 2030/2034. GC by 2030/2034 $10,000-15,000 an ounce. Cryptos all to zero except one. And it won’t be Bitcoin.
    DX should move to 98 area if it gets there. The DX is heading for 41-44 area in the next few years with the low to be in 2023/2025 area. Will base for 3 years after the low just like the 6E ( Euro ) has done. USD/JPY to move to 116 area then triple top at 122-125 area. After this it’s headed down big time. 6E, 6B, 6C, 6A, CHF, Kiwi all going to rocket up starting in 2019, but full effect in 2020 onwards.
    The best investment from 2020-2030 will be GC, SI ( paper markets to trade only), Gold and Silver physical.
    I spend my time day and position trading. RTY is the best mkt to daytrade . CL is wild and is very slow and then moves very rapidly. Not meant for a novice. CL is topping and if past $72 for 3 days then we could see $79-83. That should be it. Unusual behvaviour for CL as its usually goes down from May/June into Septembe time frame. Even GC and SI seasonal low in August. Not this year.
    ES is the most trickiest market to daytrade. YM flows and is techincal. Never traded the dog..NQ.
    Best way to trade is Position trade of daily chart.
    Buffet became great with buy and hold because he started young 9-12 and was never deterred as his dad was a broker prior to depression and went to crash and depression. 99.9 percent of people would have never got into the stock market then.
    Always do the opposite.
    I could go on and on. Its your site and I have no interest in a blog or a website.
    Your good. Keep the great work going. Your analysis is better than 99.9999 percent of what I’ve read in the last 40 years.
    Your got something here. That’s your talent.
    Best.

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