I’m not the most active person on LinkedIn, more of a quiet observer who scrolls now and then. I do make new connections occasionally (selectively, of course). At the risk of upsetting some people, LinkedIn can sometimes feel like a stage where many are more interested in “showing off” than sharing real insights or adding value.
One person I always make a point to follow is Denise Chisholm. Her insights are consistently outstanding, often making me pause, think, and challenge my own views. She is back again! Came across another timely piece from her.
Here is a section:
For much of the last month, something weird happened: Treasury yields rose while the dollar fell. That combo made some investors nervous – was it the start of something new? A breakdown in old relationships? A warning sign about the dollar’s status? Probably not. If you zoom out, this divergence looks more like a short-term blip than a structural shift.
Over the last three months, both the dollar and yields are down. But even if this unusual pairing were to resurface and stick around, it is not as rare or as sinister as it might seem. Looking back to the late 1970s using the broad trade-weighted dollar, there have been plenty of 12-month periods (a little less than 20% of the time) when the dollar depreciated while yields rose. It happens.
But here is the kicker – historically, equity market returns are roughly the same across all four combinations of rising/falling rates and a rising/falling dollar. If you had to pick one that has been best for the S&P 500? It is this one – higher yields and a weaker dollar historically. That is probably because a weaker dollar has coincided with better GDP and profit growth than a stronger dollar, and that has been especially true over the last few decades.
