Is a Falling US Dollar Causing a Stock Sell-Off?

“As pressure mounts on the greenback, US stock futures chart a course modestly lower,” read a headline on MarketWatch before the open this morning.

Exhibit One on why the financial media is so confusing.

Up till now, a falling dollar has been given as the one constant that has propped UP stocks since coming off their late-April highs.

S&P Charted Against the US Dollar Index

In fact, the upward trend in stocks has become especially pronounced as the dollar has weakened during the September rally. When the dollar rallied in August, stocks sold off.

Now, apparently, a falling dollar is responsible for stocks charting a “modestly lower” course.


The real takeaway: Since the April highs, the S&P is down 5% and the dollar index is down almost as much. Anyone holding an S&P Index fund just got handed a double whammy.

In our opinion, you’d do better to stick with specific stocks and forget the indexes as best you can.

Addison Wiggin
for The Daily Reckoning