The US dollar's recent slide is flashing a bullish signal for markets
The dollar's recent slide is good news for global markets as it signals that investors may be starting to shed safe havens, according to DataTrek. — is poised to continue falling toward its long-term average of 115, which 3.8% below current levels, Nicholas Colas, co-founder of DataTrek Research, said in a note.
"A weaker dollar at this point in the global economic cycle is both consistent with the past and a generally bullish sign about the future," he wrote."This is one of those developments that, at first, may seem counterintuitive to dollar-based investors. It is, however, how markets signal better times to come."
A weaker dollar is positive for both non-US equities and US tech stocks, which is the only S&P 500 sector with substantially more than half its revenues from non-dollar sources, Colas added.which compares the greenback's strength to a basket of currencies, spikes in moments of economic crises, such as in 2009 and 2022. But history has shown that once the turmoil passes, the dollar will weaken and growth will resume.
In 2022, the index climbed 7.9% as the Federal Reserve hiked rates aggressively to fight inflation. It has since fallen 11.3% from its September peak. , according to an earlier Eurizon SLJ Capital note. That's as cooling inflation could prompt the Federal Reserve's first interest rate cut since embarking on its tightening cycle last year.. As the dollar weakens, consumers may find that higher prices stick around for longer.
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