ChartWatchers Newsletter logo

Rising Dollar Should Change Your Investment Strategy

 | 

Throughout 2017 the U.S. Dollar Index ($USD) was falling and aiding profits on multinational companies found on the S&P 500.  But it was time for the dollar to rise, as evidenced by a surging U.S. 10 year treasury yield ($UST10Y) vs. Germany's 10 year treasury yield ($DET10Y).  Check out this chart:

I anticipated the dollar strength back in my February 28, 2018 Trading Places article titled, "3 Takeaways From Tuesday's Renewed Selling....And Why I'd Avoid Gold", where I discussed potential ramifications and opportunities given the rare inverse correlation that had developed.  Feel free to click on the link provided and read more about this chart.  In my opinion, dollar strength has just begun.  Large cap multinational companies have been underperforming since the dollar bottomed and the next chart highlights this relative weakness:

One of the best areas within small caps have been healthcare stocks where we've seen the PowerShares S&P SmallCap Healthcare ETF soaring in 2018:

The trendline remains intact and smaller healthcare companies are likely to continue to outperform their larger cap counterparts so long as the rising dollar continues.  Reallocating a portion of your portfolio and overweighting smaller cap issues makes a lot of sense in a rising dollar environment.

Happy trading!

Tom

 

 

Enjoy this article? Hear more from Tom Bowley at

August 10th & 11th, 2018


See how the experts are protecting themselves from market volatility and reducing risk in uncharted waters

Join us online this August for two full days of investing insights, charting wisdom and market commentary from the industry's leading technicians. Streaming live wherever you are, you'll learn exactly how the experts are navigating the market's changing tides and remaining profitable in all conditions.

Tom Bowley
About the author: co-founded Invested Central and served as the site's Chief Market Strategist for more than 10 years. His unique trading style combines both his fundamental and technical strategies to systematically manage risk while trading. A regular contributor to StockCharts.com's bi-weekly ChartWatchers newsletter since 2006, Tom's role at StockCharts has expanded significantly since he joined the company as a full-time Senior Technical Analyst in March of 2015. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus