Might the Dollar Be Entering a Bear Market?
Disclaimer: Your capital is at risk. This is not investment advice.
I haven’t mentioned last week’s flash crash or the yen, mainly because ByteTree clients have heard enough. More to the point, they are long Gold and the Yen and therefore had a cushion of sorts in the recent malaise. Yet one key reason that the crash came to a halt is the weak dollar. To get a 2008 or 2020-type crash, we have typically seen the dollar surge. This time, we didn’t, and the dollar is flagging a downtrend.
Dollar in a Downtrend
Dollar downtrends are generally good for gold, commodities and the world ex-USA. My career got going in the 2001 to 2008 era, which saw the dollar fall by a third and the S&P 500 slump, while everything else seemed to go up. I’ve been like a parrot on this, but it strikes me that we are overdue a repeat era. A dollar bear would certainly help, as would a more buoyant Chinese economy. It’ll come and unlock huge amounts of value around the world.
Be patient.
The S&P 500 vs gold (normally the way around) is shown against the dollar index. Gold should beat the S&P as the dollar slide continues. It’s a repeatable habit.
A Weak Dollar is a Boom for the World ex-USA
The dollar is soft because the US has high debt and deficits, and they are not alone. But they are the biggest, and the dollar is super expensive on a purchasing power basis. A sustained dollar bear is going to happen, but when?
A Rich Dollar
The USA can keep the deficits going for many years to come, but something must give. The choice is the economy or the dollar. Presidents generally choose the latter.
A Week at ByteTree
In Atlas Pulse, I discussed the quiet bull market, which so many investors have missed. But the central banks have been all over it. Quiet bull markets are the best bull markets, as it’s when the crowd goes wild that the risks are highest. I also discussed sentiment and how many misinterpret the data from the futures market.
In The Multi-Asset Investor, I covered the panic of August 2024, which may soon be forgotten… or will it? If nothing else, it should remind us how quickly these things can escalate and how this market is so dependent on liquidity provided by policymakers.
Finally, in ByteFolio, where the pain was felt most, we discussed how Bitcoin remains dominant with a 56% share of the crypto market. Imagine one stock being 56% of the world index. Sentiment is pretty weak too. This index from Coin Market Cap is pretty good.
Great Find.
Having covered the aftershocks of the market crash for the other portfolios, I will be publishing a Venture deep dive this afternoon.
Have a great weekend,
Charlie Morris
Founder, ByteTree
