Stocks Hate the Dollar

A strong dollar used to be good for U.S. stocks, but since the credit crisis broke, that relationship has completely reversed itself.
Here are some numbers: Starting from the beginning of 1999 and going through September 17, 2008, on days when the dollar has rallied against the euro, the S&P 500 was up an annualized rate of 34.9%. But when the dollar fell against the euro or stayed the same, the S&P 500 dropped by an annualized rate of 26.7%. Stocks clearly liked a strong dollar.
Since September 18, the numbers are striking. On days when the dollars has rallied against the euro, the S&P 500 has fallen at an annualized rate of 95.7%. When the dollar has lost ground to the euro, the S&P is up by an amazing 747.5% annualized. Of course, that’s a much smaller sample size, but the early evidence suggests that stock investors now favor a weaker greenback.

Posted by on February 20th, 2009 at 12:46 am


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