Diamonds and Dogs
Ying and the YangYing and the Yang
As stock prices continue to rise, currently the Dow is up over 8% year to date, the S&P 500 and Nasdaq up over 6% respectively, the US dollar continues to fall. Stocks are trading higher than they were in June of 2008 while at the same time the dollar is lower than when it hit a multi-year low in August of 2008. This is no coincidence, as the Fed floods the market with cheap money via low interest rates, the dollar will fall in value. A lower dollar is currently very good for large capitalization multi-national companies like those in the Dow or S&P as their exports are more competitive and their overseas earnings are reported in dollars. The cheap dollar policy of the fed puts wind into the sails of stocks, so hang on for now. The problem could be in June when the Fed ends QE2, and that will be the talk this week, as Ben Bernanke charts the future course of interest rates, the dollar, and ultimately the price of stocks and commodities.