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The red line in the chart below is not an inverse of the S&P 500. It's actually an intraday chart of the dollar. No sooner than one goes up, the other goes down.
October 22, 2009 at 02:51 PM in Currencies | Permalink
This relationship has been true for most of the decade. Much of the movement in the S&P 500 is directly attributable to the fall (or rise) in the US$. You should post a graph of the S&P corrected for the trade weighted exchange rate since 2001. You could also price the S&P in terms of barrels of oil or ounces of gold to get the same effect.
It gives you a sense of how poorly the US economy has been doing in real terms since the turn of the century!
A. Howarth |
October 22, 2009 at 03:52 PM
Yes, I agree. But I believe this relationship will stay intact only as long as the dollar moves are slow.
If we were to see a rapid decline starting, the Fed would be forced to raise interest rates aggressively, and the stock market will likely take a hit.
October 23, 2009 at 12:12 AM
Thanks that has been my view, too. Dollar still hasn't done anything conclusive on the upside ... yet. Not saying it won't, but it has won intraday skirmishes before only to trend to NL's.
The scenario least mentioned is USD & stk mkt both declining to a short-term low this Q.
October 27, 2009 at 04:09 AM
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