I love getting asked the harder questions and breaking it down into an understandable response.
So, the big news this week is the US dollar hitting record lows not seen for several years. Why does this matter? It's effects your portfolio. Emerging market stocks have had a tailwind along with Gold, and as long as the dollar stays weak, this should continue. Even economically sensitive stocks like industrials can have some upside as our exports are cheaper to foreign buyers.
If you need to get more wonky or impress at your next Zoom happy hour, just say this:
1. There is a ton of emerging market debt that is priced in dollars. So, when the dollar falls it helps pay back money at a cheaper cost - kind of like lowering interest rates. Plus, emerging markets are super cheap compared to hot tech stocks and over the past three months have done just as well.
2. Gold has a negative correlation to the dollar, -0.98 for the math geeks. So, it's not a mystery why gold has surged, just look at the US dollar. As long as the Fed keeps supporting the economy, real yields will be negative and gold will keep rising. (Then spend the rest of the happy hour avoiding gold bugs, they are a little cooky).
3. As we come out of the recovery, a cheaper dollar will help the cyclical stocks/value stocks/not tech stocks as our exports will be more attractive to foreign buyers.
Considering how everybody seems to love tech stocks like it's 1999 all over again, I just wanted to point out that there are other things in the world to invest in.