Investors aren’t limited to only investing in the S&P 500 and the Dow Jones Industrial Average. Every week we share the market trends we are following. We are interested in whether the trends in those markets are continuing or if they are experiencing a temporary or complete reversal.
When we identify trends, we are only concerned about the price data and what it says about any given market. We don’t need to know why a trend has formed to invest, but our human nature wants to understand what is driving them. Each week we try to offer some perspective on what we think the most substantial moves are and what critical drivers are behind them. Here we look at what is going in our globally diversified, non-correlated Crystal Bay Ubitrend strategy.
Last week’s continuing trends:
- Indian Rupee
- Chinese Yuan
- Nickel
- New Zealand Dollar
- Lumber
Last week’s reversing trends:
- Brazilian Real
- US 30-Year Government Bonds
- Feeder Cattle
- Euro-Pound Cross
- UK Gilts
What we are taking note of:
The US dollar continues its slide against most of the world’s currencies. Starting in May, the Fed and the US Treasury’s aggressive posture has been spooking the currency markets.
The US dollar has been strong and stable since the summer of 2015 on expectations that quantitative easing would come to an end at some point, given the remarkable performance of the US economy. After a ten year expansion, it stood to reason that monetary stimulus was no longer necessary.
The COVID pandemic killed that theory. The Fed stepped on the gas pedal, and stimulus is back, bigger than anywhere else in the world. The size of the government response has been so big that disposable income in the US is actually up year on year, despite collapsing economic output.
No other country has been this aggressive.
How are we heading into next week?
In the first phase of dollar weakness, it was declining mostly against the euro and yen, which are major developed currencies. Since July, however, it started to decline even against emerging markets currencies. Recent remarks by Chairman Powell promising more inflation are adding fuel to the fire.
U.S. dollar Index – Past Six Months
The Crystal Bay Ubitrend has long positions in a number of emerging markets and commodity currencies.