Stocks Won't Get Bucked by the Dollar

"Freedom's just another word for nothing left to lose."

-- Kris Kristofferson

When pundits are given the choice to put up or shut up, too many elect to do neither. While this may be acceptable in certain endeavors, it is or should be inexcusable in market commentary.

More than enough data exist in readily accessible formats to either substantiate or refute any claim. This should cut down on the nonsense, but it does not appear to do so.

The trigger for this righteous indignation is the connection being made between the dollar's descent and the resulting comeuppance being posited for U.S. stocks.

Nevermind that markets are discounting mechanisms and that the direction of the dollar was apparent by late September, when the S&P 500 was 4.6% lower than present levels. Nevermind that the trade-weighted dollar index has been declining since early 2002 and that arguments were presented here in May and June 2002 that the weaker dollar should derail neither stocks nor bonds.

For those of you keeping score at home, the dollar index has declined 27.5% since late May 2002. The annual average total returns on the broad Russell 3000 and the Merrill Lynch Treasury Master indices since that time have been 6.27% and 5.95%, respectively.