Uncle Buck

I have been saying for almost 2 years since the initial breakout of the dollar in late 2014 that it is poised to go higher, much higher.  After peaking in March of last year from the first labeled breakout in the chart below, the dollar has been in a massive, multi-year horizontal consolidation waiting for the impetus to escape its clutches.  Apparently Trump’s the election was what the doctor ordered as last week it found massive escape velocity and vaulted out of the rectangle.

best independent fee only cfp advisor in the SF bay area -11-2-16 -USD

While the first upside target is only about 8% higher to ~108, the implications on the rest of the markets are enormous. Emerging market stocks and bonds, US stocks, commodities (including oil and gas), precious metals among other all have historically been negatively correlated with the dollar and as such struggled (and some mightily) as it rises. Because correlations do not always hold, the question investors need to ask themselves is will this time be different?

Regardless of the answer, Uncle Buck is signaling it’s moving higher and investors would do well to keep a close eye on their investments. Strong currency moves, especially in the world’s reserve, can have nasty implications for those caught unaware.