Stronger Dollar = Higher Stocks?
The S&P 500 is attempting to break-out again today on a massive rally in the financials. As the G7 talks of a stronger dollar policy, and the Fed hints at a cessation of interest-rate cuts, money is coming out of commodities and looking for a new home.
A lot of that money has gone into financials. Are higher interest rates good for financials? Not a chance. So, you could call this rally “dumb” as Jim Cramer did today. However, if an abnormal amount of money left the financials to go play in commodities and is now simply returning, it might not be so dumb.
The dumb part would be that the idea of higher interest rates will be good for an economy in recession. That’s really dumb, and a higher dollar will hurt one of our only strong sectors: exports.
Maybe we have to take a deeper recession to kill off inflation, but that doesn’t sound like a catalyst for higher stock prices to me.
