How a Stronger Dollar Affects Your Investments
Most analysts feel the dollar could strengthen further. You may consider currency-hedged ETFs while investing internationally.
European stocks have benefited from the weak euro. Not only do exports look attractive to Americans, large-cap European companies also gain from currency translation.
The Fed is likely to increase rates by September, while other major developed markets are still in the QE phase. The dollar should stay stronger for a while, with higher US interest rates.
Germany is a growth engine and the biggest economy in Europe. Germany is showing signs of improving, with inflation inching up and positive growth at 0.7%.
While the risk-averse investors are resorting to US Treasuries, which provide higher yields, others are looking at stocks that pay high dividends for yield.
While the US could see a rate hike later this year, Europe and Japan are still pumping money into the system through their respective QE programs.
An improving European economy would be great news for US stocks because many US exports end up in Europe.
Yields have been dropping in this period, leading investors to prefer government bonds over stock, especially the safer ones, including the German Bunds.
Rising wages in Germany have been a boon for private consumption. The weaker euro helped German exports. France also reported a revival in its inflation rate.
An increase in jobless claims indicates declining household income. This means lower consumer spending. Generally, this doesn’t bode well for retailers.
The commodity market saw another big jump in the price of crude oil. Crude has been rising since mid-March due to conflicts in Yemen and the inventory growth slowdown.
Investors can find value in emerging markets (EEM) as well, particularly in Asia. China (FXI), India (EPI), and South Korea are all witnessing rallies in their equity markets.
With the US dollar (UUP) already affecting exports, a steep rate hike is the last thing the US economy needs. So monetary conditions are likely to remain accommodative for now.
Calling the current slowdown a recession may be overkill. So, barring the occurrence of a black swan event, it might not be the end of the bull.
Though the economy may not have performed as well as hoped in Q1 2015, a recession is not in the cards. Indeed, the US economy is one of the bright spots amid the global growth slowdown.
The current bull run is among the top five longest in history. Since World War II, the average bull market run has lasted 58 months.
OPEC’s monthly oil market report showed that crude oil production increased by 810,000 bpd to 30.79 MMbpd. The increased production was led by Saudi Arabia.
On April 15, 2015, the EIA reported that weekly crude oil inventories increased by 1.02 MMbbls—the lowest inventory increase since January 7, 2015.
Saudi Arabia was the top producer with 10.1 MMbbls in March 2015. OPEC could regain its market share if the US production trend continues to decline.
NYMEX-traded WTI (West Texas Intermediate) crude oil for May delivery increased by 5.82% and settled at $56.39 per barrel on April 15, 2015.
But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.