The Dollar / Stock Market Conundrum ...

[MJ DeMarco]

Is anyone having trouble dealing with the dollar / stock market conundrum?

For those of us who believe that the dollar will devalue significantly, it also means that the stock market will rise.

If you believe the stock market will FALL, you have to then believe the dollar will STRENGTHEN.

The dollar and the stock market have become inversely related.

As the market rises, the dollar falls.
As the market falls, the dollar rises.

So, if you believe the dollar will crumble, you then have to attribute that the market will continue to rise. Yet, if you think the markets are overbought, you have to conclude that the dollar will strengthen.

This conundrum has made me a little indecisive with the markets because I believe BOTH the market is overbought AND the dollar will decline. But BOTH cannot exist simultaneously so one investment strategy has to be taken over the other!

But which? Continued dollar weakness? (Implies higher markets) Or the stock market is overbought and retreat is certain? (Implies stronger dollar)

 

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[kurtyordy]

right now they are running inversely, but I do not think this will continue.

Dollar falls, but companies go bk, market will fall on the bk's, even though the dollar is weak.

Does that make sense?

 

[lee]

I´m thinking about the exact same thing, if you take a look at bloomberg, there´s an interview with Marc Faber, who points out the same correlation but also adds to it, that it is possible for it to break(although not very likely).
I think it is possible that people start dropping US stocks and the dollar at the same time and shifting assets to other markets, should the budget deficit and trade defitits continue to widen and should there be no real evidence of a recovery in the US.


I don´t really know what to do either, I´m still waiting for a pullback...

 

[CamInBoise]

Charley Blaine seems to reflect your sentiments MJ. In his article he attributed the fall in stocks today directly to the gains the dollar made.


Stocks tumble on dollar reversal- Market Dispatches - MSN Money

Interesting stuff.

 

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