Re USD weakness & stock market performance
At one time I had several emerging market funds under management, in countries with consistently devaluating currencies.
When looking at performances in such markets, we would ask brokers to print out the USD chart, since the local currency charts showed predominantly climbing charts. That is, since the local currency kept depreciating, their stock market kept going up in the long term. Not so in USD terms, though...
What I am trying to say is that it is normal to see initially increasing stock market valuations (in USD) at a time when the USD is depreciating so fast, since most of the blue chips will not lose as much value (they can raise prices, they export, etc). I believe that is part of the reason why equity markets have been on the rise recently.
At some point (perhaps already?) a continuously falling buck could/will trigger a mass exodus from US assets. Personally, I think it is an unmitigated disaster for the US, and one that will spread very near term to the stock market
I am not sure if there are many investors left out there holding on to exclusively US assets. Most have already made their baskets in view of the recent depreciation of the USD. Anyway, I don't fear so much the individual, or even corporate investors withdrawing from USD denominated assets. The real Democles' Sword is the possibility that it may lose its hard currency status - i.e. countries switching to the EUR or a basket of currencies for their hard currency holdings, OPEC starting to quote oil prices in EUR, etc. Imagine how the market will be flooded with USD if THAT happens... |
