June 5, 2013 at 10:35 am
So goes the market? John Lansing said the lock-step relationship between the U.S. dollar and the U.S. stock markets is back after a hiatus due to quantitative easing. What do you think? Can the U.S. dollar once again predict what the S&P is going to do?
June 5, 2013 at 3:13 pm
I don’t think there’s any predicting what the market will do. Correlation does not equal causation. I’m fairly new to the market but I’m starting to think a lot of bellwethers like the dollar, gold, UPS, etc are somewhat over-hyped in their importance.
June 22, 2013 at 3:45 pm
Even though QE is/maybe/will be over (or not), it caused an asset bubble by printing money. I think we can be in for a rough ride when interest rates rise, the presses go silent, and selling sets in. Other countries have so many ways to affect gold and dollar value that correlation is nebulous at best.
June 22, 2013 at 5:14 pm
“I don’t think there’s any predicting what the market will do. Correlation does not equal causation. I’m fairly new to the market but I’m starting to think a lot of bellwethers like the dollar, gold, UPS, etc are somewhat over-hyped in their importance.”
Overhyped? Listen carefully – the intermarket relationships between the different asset classes is extremely important to understand. If your main currency is the dollar, the value of that dollar in relation to other currencies directly affects the value of everything relative to you. That is one of the reasons buying foreign stocks is tricky, since even though the company may be doing well, if their currency value relative to the US dollar changes dramatically, your investment will be more affected by this than the company’s value. Another example is oil – most oil in the US is still imported, so if the US dollar decreases, the cost of oil (and indirectly gas) will go up.
These are just small examples – there is way more to this – many books have been written on this subject and it is highly important as an investor to understand them.
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