What is the typical impact of a weakening dollar on the US stock market?
I would assume a weakening dollar would make US stocks "cheaper" relative to other currencies/stock markets and therefore increase demand which would increase stock prices.
Is this correct?
Thanks.
http://stockmarketbottom.com
40-50% of SP500 revenue is from foreign countries so weak dollar boosts the stock market for that reason also
I don't think anybody would be investing in the US just because the USD drops a little. On the other hand, if the USD depreciates a lot vs. other currencies and investors think that this will continue they will not invest in the US, because they might fear that their USD denominated stock will not be worth much when they sell it in the future. Currency fluctuations play a much larger role in fixed income than in equities though.
On a more practical note, the USD and the S&P 500 tend to have a negative correlation. The reason is that the USD is a risk-off asset and stocks are a risk-on asset. So if the mood is risk-on, stocks rise and the USD drops and vice versa.
Enim et aperiam deserunt harum non reprehenderit optio rerum. Molestiae ducimus porro voluptatem eligendi molestiae quidem. Velit voluptatem explicabo consequatur atque illo molestiae rerum. Qui ut optio similique.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...