A Rising, or ‘Strong Dollar’ Is Not What’s Holding Down Equities

A Rising, or ‘Strong Dollar’ Is Not What’s Holding Down Equities

Share to Linkedin If you're a Forbes or a Forbes. com reader, odds are you're an investor. And if you're an investor, you're likely familiar with the popular narrative at the moment that a rising dollar helps explain troubled equity markets. The view isn't very well-founded. All that's required to bolster the previous assertion is stock-market history. In the decades since President Nixon severed the dollar's link to gold (thus unleashing "strong" or "weak" dollars based on the currency's direction), stock market returns were greatest in the decades when the dollar was "strong," and weakest in decades when the dollar was "weak." Which is somewhat of a statement of the obvious. Investors know why. When you put money to work you're in pursuit of returns in dollars. More specifically, you pursue returns in dollars because of what dollars can be exchanged for. In that case, stop and think what's more appealing to you as an investor: returns in dollars that are exchangeable for more and more goods and services, or dollars that fetch fewer and fewer market goods. The answer is fairly obvious. And it helps explain the absurdity of the belief that a falling currency renders a country economy