We’ve spent the better part of this year highlighting one breakout after another against the Greenback. The evidence is everywhere you look.
Emerging-market currencies, developed-market FX, precious metals, and international equities. All these things are working.
This is more than just a handful of datapoints. It’s textbook intermarket behavior. And it’s what a weak dollar cycle looks like.
If you’re still trying to figure out where to put your money when the Dollar’s trending lower, you don’t have to guess. History has made it clear:
This is the All Star Charts Weak Dollar Composite, a custom index we built to track this basket of assets. They all have one very important thing in common: they outperform when the Dollar is falling.
See how tight that inverse relationship is?
When the Dollar is in bullish regimes, these assets take a back seat. When the Dollar is in a bearish regime, they tend to lead.
And it’s not just this cycle. You can zoom out forever and see this intermarket action repeat throughout history. We’ve seen it before, and we know the playbook.
This is why we continue to emphasize the importance of exposure to assets such as international stocks and commodities. They are short-dollar trades, and currently, they are working better than anything.
We believe the weak dollar theme has legs as this downtrend appears to have just begun.
Sure, the Dollar may get tactical rallies along the way—mean reversion, oversold bounces, you name it. That’s normal.
However, the weight of the evidence overwhelmingly suggests that the primary trend is lower for the Dollar. And that means the path of least resistance is still higher for all these other trades.
We’re not fighting it. We’re leaning in.
Stay long ex-US equities… even treasuries. Stay long metals. Stay long commodities.
These are the Weak Dollar Rules.
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