There is zero evidence of a long-term correlation between stocks and the dollar

Jon Krinsky’s note this weekend contained an important chart reminding investors that the US dollar is not, in and of itself, a long-term threat to the stock market.

Without question stocks can be either positively or negatively correlated with the dollar and then the trend can either fade or completely switch in a 180. Constructing a bullish or bearish thesis based solely on the dollar requires you to get a lot of stuff right that you probably can’t.

Here’s Jon Krinsky of MKM Partners with my favorite chart o’ the day:

One of the biggest perceived headwinds for stocks is sustained strength from the U.S. Dollar. While an extreme spike in the DXY would likely cause some volatility in the short-term, there is very little evidence that a strong dollar will prohibit stocks from advancing.

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Source:

Small-Caps, Dollars, and Bonds, Oh My…
MKM Partners – November 20th, 2016

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  1. Big Week for Data - TradingGods.net commented on Nov 28

    […] especially if they do not do any currency hedging. The flip-side gets no attention. Josh writes, There is zero evidence of a long-term correlation between stocks and the dollar. Take a […]

  2. Dash of Insight| 2016 Silver Bullet Awards Part Two commented on Jan 10

    […] Jon Krinsky of MKM and Downtown Josh Brown both earned the Silver Bullet award in late 2016, for taking on myths about currency strength and stock performance. In sum: there is zero evidence of a long-term correlation between stocks and the dollar. […]