Pay attention: the U.S. Dollar’s rise is critical for investors.
The U.S. Dollar has broken out against other developed-market currencies. Although the Dollar may fall for a short period of time over the next few weeks, its longer term trend is higher. We believe that this rise is being permitted in order to cushion the effects of the end of quantitative easing, keep the U.S. government’s borrowing costs low, and suppress the prices of commodities, especially oil. We believe that as the Dollar strengthens, and other currencies weaken, global money flows will turn to the U.S., supporting prices for Treasuries and for U.S. large-cap stocks — especially those of companies with minimal exposure to foreign markets. An appreciating Dollar may offer some investors an opportunity to short foreign currencies such as the Euro, Yen, or Canadian Dollar. A strong Dollar and an increasingly desperate Russia may put pressure on gold prices.