Breaking News

The USD And The Macro Equities Correlation

By Andrew NyquistForexMar 12, 2013 10:09AM ET
The USD And The Macro Equities Correlation
By Andrew Nyquist   |  Mar 12, 2013 10:09AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

There are a lot of ways to look at the correlation between the U.S. Dollar and U.S. Equities. That said, we’ve covered this theme before; see my recent piece here and Andrew Kassen’s here. But this is a part of a much longer conversation meant to be parced in pieces. So I’ll continue the conversation with a couple more historical U.S. Dollar charts and some thoughts. Please feel free to post comments below.

The Correlation
Considering that the market recycles the secular “bull” and “bear” every 16 to 18 years, I thought it would be good to look at a chart of the past 30 years to see if the often talked about equities-to-U.S.-dollar correlation holds true. And considering that 1982 was roughly the start of the last secular bull market, with 2000 roughly marking the top and the start of a new bear market, this time frame offers a lot of data points to consider.

From a macro secular point of view, the correlation has been decent over the past 30-plus years: when the U.S. Dollar Index peaked near 160 in 1985, the S&P 500 was less than 200. And when the S&P 500 hit new highs over 1500 in 2007, the U.S. Dollar Index was cut in half at 80. However, looking at the various cycles and fractals of time, it is much less reliable. From 1981-1985 and 1995-2000, the dollar rallied along side equities. But even so, the ratio of equities pricing (S&P 500) to the dollar index was expanding (see the second chart below). That said, the attacks of 9/11, coupled with the housing and sovereign debt crises (all during a surge in globalization) brought about the current era of low rates and easy Fed Policy. And this has exploited the correlation further. So, again, on a macro basis, the correlation holds water over the past 30 years.

Blurred Lines
But -- and this is big but -- there are many countries involved in the ongoing sovereign-debt crisis, which could spur currency wars and additional volatility -- both of which may blur the correlation going forward. Interesting times, my friends. As always, thank you for reading.

U.S. Dollar vs. S&P 500: 1981-2013
U.S. Dollar vs. S&P 500: 1981-2013

S&P 500: U.S. Dollar Correlation Ratio
S&P 500: U.S. Dollar Correlation Ratio

The USD And The Macro Equities Correlation

Related Articles

The USD And The Macro Equities Correlation

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post also to:
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post 1000
Please wait a minute before you try to comment again.
Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Add Chart to Comment
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email