De-Dollarization and the Unstoppable SPY -

8월 19일

It's somehow insane to me to wake up and see such doom and gloom on the screen, and have such a strong SPX ripping in the face of all the bad headlines.

Yet again this morning we're up and to the right, despite a "bumpy landing", war in the Middle East, and various black swan events in Asia among other regions stirring rumors of various unwinds.

How can the headlines miss this bigger picture?

While doom and gloom reign, there is a lack of coverage around the Dollar Index (DXY), which takes a mix of data from both central banks and currency pairs, and pulls them together to look at Dollar strength relative to the world. The index moves slowly, but it's the larger trend that reporters often fail to make a headline out of.

There is no doubt that over the last few years, the dollar remains stable, as it's done very little... but today dollar instability may become more of a common discussion.

Despite the DXY instability, people are still confident in the US economy, and that means a strong equity index performance as a result, considering most S&P 500 and major companies are exporting at a higher rate than importing, and as a result, their COGS, as well as other key cost measures, will decline on a relative basis.

If we were indeed in a protectionist regime, it would be MUCH harder to keep indexes moving in the right direction, but it does indeed seem like we are on track to have a weaker dollar in the near-term. If we do import more consumer staples than we export, a weaker dollar creates more inflation woes. This is not likely a problem for groceries, energy, and auto, which have some strong domestic offsets to keep competition prices low.

I would assume - albeit I don't know - that the Federal Reserve has a perfect sense of what dollar weakness is good for, and I would think that it is an inflation trade that they parry with a weaker dollar.

This leaves me to ask... how low can the dollar go?

What other assets benefit? Obviously $ BTCUSD?