The Exchange Rate’s Impact on the Stock Market

The U.S. dollar has been in freefall lately, but it seems to have little or no impact on the stock market’s rally. In fact, it seems to be helping.
I decided to do a little analysis and see how much the exchange rate, the dollar/euro in particular, impacts equity prices.
From the beginning of 1999 to the end of June, the euro and the stock market were traded on about 2100 days. On days when the euro rose against the dollar, the S&P 500 lost a combined 66%. Annualized, that works out to a loss of -22.88% a year. When the euro fell against the dollar, the S&P 500 gained an annualized 35.30%.
Here are the annualized rates for the S&P 500 sector groups:
……………………………Euro Up………………..Euro Down
Energy……………………9.28%…………………..17.58%
Discretionary…………-28.57%…………………..47.76%
Staples…………………..-5.07%……………………8.21%
Financials………………-27.26%…………………..51.23%
Healthcare……………..-12.84%………………….17.39%
Industrials……………..-21.50%…………………..40.90%
Tech……………………..-44.04%…………………..69.80%
Materials…………………..0.32%…………………..16.17%
Telecom………………….-24.73%…………………..19.24%
Utilities……………………-2.40%……………………7.43%

Posted by on July 17th, 2007 at 10:59 am


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