This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Global Macro: Investors Price In Weaker Dollar

Stocks in this article: GDXRSPEEMVTUSOFXF

NEW YORK ( TheStreet) --Investors appear to be pricing in a weaker U.S. dollar, which has broader ramifications for global asset markets.

The first chart below is of Markets Vectors Gold Miners ETF (GDX) over Guggenheim S&P 500 Equal Weight (RSP). The pair represents the relative strength of gold-mining stocks in U.S. equity markets.

Gold miners have recently broken out of their yearly relative downtrend, as the dollar has shown considerable weakness versus the euro and yen.

A turn up in both physical gold and gold-mining stocks is bearish for the dollar and may indicate a turn higher in long-dated Treasuries, which are now at their yearly lows.

The next chart is of iShares MSCI Emerging Market ETF (EEM) over Vanguard Total World Stock Index ETF (VT). The pair measures the relative strength of emerging-market equities versus the broader world market.

Emerging-market equities had seen a vast selloff as inflation expectations diminished, the U.S. dollar strengthened, and the Treasury yield curve steepened.

Now, however, a weaker dollar and flattening U.S. yield curve could drive funds back to foreign assets. Commodities have reversed direction off of their yearly lows, and Chinese central bank flexibility is prompting investors to be more positive about emerging-market equities.

It appears that emerging-market equities have hit a bottom, and if the U.S. economy remains relatively weak, then emerging markets should bounce off yearly lows.

The last chart is of United States Oil Price (USO) over CurrencyShares Swiss Franc Trust (FXF). The pair measures the strength of West Texas crude oil versus the Swiss franc, a traditional safe-haven currency. Oil has recently spiked higher on fundamentals and a weaker dollar, and resides as yearly highs.

The pair is consolidating, but looks to be overbought. A selloff in oil could be a catalyst for selling U.S. equities. That could further push investors into gold assets and Treasuries, as well as into assets abroad.

Much of the price action lies with the direction of the dollar and overall outlook for the U.S. economy. Don't expect oil to break lower just yet.

At the time of publication the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,195.42 +221.11 1.30%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,566.1380 +16.9120 0.37%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs