We’re not accustomed to thinking of weakness as a good thing.
A weak immune system means you’re more likely to get sick.
A weak presentation means you didn’t get your point across effectively.
A weak stock means, well, that it wasn’t very good.
But believe it or not, there is one area where weak can be good for stocks. And it’s an area you need to watch closely heading into 2021 …
It doesn’t sound good when you hear that the U.S. dollar is weak. In fact, it sounds bad, right?
Well, it’s a little more nuanced than that.
I’ve been talking with my InvestorPlace colleague Louis Navellier about the dollar and its importance right now in an investing strategy. This is something we’ll talk more about in our Early Warning Summit 2021 coming up this Thursday, December 17, at 7 p.m. ET. (It’s free to attend. Just click here to reserve your spot now and you’re all set.)
Like everything else, the dollar has had a wild 2020 as well. In February and March, as a large chunk of the global economy ground to a halt due to the pandemic, the U.S. dollar hit a three-year high. At the time, people around the world sought safety in the greenback.
Since then, however, the U.S. dollar has drifted down. On December 4, after falling 5.73% year-to-date, the dollar hit a low not seen since April 2018. It’s currently hovering slightly above that level.
A lot has happened since spring 2020 when the dollar began to fall. In response to the impact of the pandemic, the U.S. government borrowed trillions of dollars and sent stimulus checks to millions of Americans and businesses. That has led to inflation worries.
Government borrowing and spending has been chipping away at the value of the dollar for decades, and savings accounts have taken a hit. According to the Bureau of Labor Statistics’ consumer price index, you’d need $151.21 today to equal the value $100 had just 20 years ago.
But here’s what you need to know — if the current weak dollar environment persists, there’s no reason to worry. It does have some specific implications to be aware of, and even some advantages to watch for.
For example, a cheap dollar is a windfall for U.S.-based multinational companies, as their products are now cheaper overseas. Once the international currencies are converted back to dollars, it pads the multinationals’ sales.
Lately, multinational tech companies have outperformed as the dollar has dropped. As you can see in the chart below, the S&P 500 Information Technology has soared 77% since the bottom on March 23.
Superior stocks with strong sales and earnings, like those Louis and I hand-picked for Power Portfolio 2020, did even better.
Take Chinese e-commerce giant JD.com (NASDAQ:JD). Its shares climbed 107% since the March bottom.
The stock gave us an outstanding 161% gain in Power Portfolio 2020 and was our biggest winner.
So if you hear of a “weak” dollar, please don’t let that derail your investing plans for 2021.
Stocks look as if they’ll head into 2021 on a roll. The Dow recently climbed above the 30,000 level for the first time in its history. The S&P 500 hit an all-time high on December 4. And the Nasdaq soared to a record high on December 8.
But that’s just a glimpse of what’s to come. We believe we are now on the cusp of an amazing technological revolution that will carry stocks to incredible new highs.
One year ago, when Louis and I introduced Power Portfolio 2020, our goal was to offer our members a robust, diversified stock portfolio that would do well in all sorts of economic conditions.
We are proud to say we accomplished our goal. We closed the portfolio with massive gains of 35%, which blew away the Dow’s 6% return over the same timeframe.
And now we are looking at multiple factors that could bring big upside in 2021.
The reality is that the convergence of new technologies like artificial intelligence (AI), 5G, precision medicine, the Internet of Things (IoT), driverless cars, and the blockchain are recreating the very framework of modern society.
And that’s why we believe 2021 will be one of the greatest years in history to be an investor …
The early readings from Louis’ quant-based systems are off the charts. My own research has me as excited as I’ve ever been about what’s to come.
And there are some obvious and not-so-obvious reasons for our views.
We want to let you know all that’s taking place and why we’re so bullish for 2021. That’s what we’ll do this coming Thursday, December 17, at 7 p.m. ET in our Early Warning Summit 2021.
Simply click here now to let us know you’re coming and you’re all set.
This is important information that we know you’ll want to hear to get on the path to building wealth in the year ahead.
On the date of publication, Matthew McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.