Stocks are priced in dollars.
Get out. Now.
Weak dollar means it takes more to buy something, thus a higher price.
I only know one thing: We’re in a hell of a mess.
I have a dumb stock market question
Absolutely no such thing these days...
Globalization and across-ocean investing causes the American stock exchanges to react to what’s going on in Europe. The strengthening of the dollar means that the Euro is going down, reflecting on the state of debt in Europe.
If the movement of the dollar is being driven by interest rates then you see the correlation. US lowers interest rate making dollar interest bearing assest less attractive to foreigners so dollar falls but lower interest rates make stocks a more attractive investment to US investors so stock market higher.
Though stocks being priced in dollars is not the whole story.
There is an enormously leveraged dollar-carry (borrowing of dollars) which has allowed investment banks to pump very cheap dollars into stocks.
Now that the dollar is showing sustained strength, those carry-trades are unwinding, and the stock market will whip back to its March lows.
By which I mean - last March’s lows.
Other communist countrys can not afford American products but theirs are cheap to us.
The answer is Goldline International.
As long as we have a weak dollar it is cheaper for American companies / manufacturers to sell their goods overseas.
IOW: A strong dollar hurts American exporters and helps importers.
The Stock market is considered hedge against inflation (dollar devaulation) like gold and is not tied to the dollar closely global economy.
Plus bonds are tied to a dollar, vs stocks. So investors jump back and forth from bonds(dollars) to stocks.
Much of the market, in particular stocks, are owned by foreign investors / funds. Because of this, during a strong dollar cycle, it makes sense for those investors to sell and take profits. During a weak dollar cycle, it make sense to buy.
well weaker dollar means our exports are cheaper that probably has something to do with it
A number of possible reasons:
1. A higher dollar makes US exports more expensive around the world. If most of US growth has been in the export sector as the domestic economy is stagnant then US stocks would fall.
2. A higher dollar makes US share prices more expensive and rates of returns lower to foreign buyer without further expected appreciation. [The return on a stock to a foreign owner is the dividend plus any appreciation of the dollar during the time.]
3. A higher dollar makes foreign assets, ie stocks, cheaper. American assets holder could view foreign stocks as relatively more attractive now.
4. A high dollar might imply more money demand in the US or tighter monetary policy meaning deflation is around the corner. More economic stagnation is not good for the value of companies.
The two can be unrelated too. The higher dollar could be due to political uncertainty around the world while the lower stock market could be due to pricing in further Obama business mistreatment.
Look for beat up stocks of well run companies.
Its a buy opportunity.
Investors buy and sell based on what they think will happen in the future, not what happens at the current moment. Does that help? Probably not. Investors are hard to figure out.