Six reasons why the dollar may weaken, and 12 ways to profit from it: (via Michael Brush)
With the S&P 500 Index about to post its best quarter since 2009 and investor sentiment brightening, now may be a good time to look beyond stocks for profits.
So it’s no wonder Trump has been calling for a weaker dollar. He said he opposes “a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business,” in a March 2 Conservative Political Action Conference speech. It looks like this dynamic should start playing out with the dollar soon. Since January, inflation expectations embedded in Treasury Inflation-Protected Securities have picked up, points out Jim Paulsen, chief investment strategist at The Leuthold Group. This trend could hurt the dollar, sooner or later. Economists calculate embedded inflation expectations by subtracting the yield on 10-year TIPS from the yield on normal 10-year bonds. The difference increases as inflation expectations pick up.
5. A declining dollar creates a feedback loop Since commodities tend to go up in price when the dollar goes down, a weaker dollar helps emerging market economies, which are often commodity-based. That EM economic strength would weaken the dollar more because it draws investments out of the U.S. toward the EM growth.
Grundlach describes MMT as “complete nonsense.” He’s equally harsh on Trump for the growing deficits and debt since the election — even though Trump promised he’d fight these, before he got elected. Trump’s loose fiscal policy is one reason why Gundlach is bearish on the dollar.
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