There’s Been An “Anti-Dollar Movement” In The Market Recently by Eric Bush, CFA – Gavekal Capital
Part of our investment work is understanding what has or hasn’t been driving the market recently. We quantify this by regressing various valuation, fundamental, estimate, and correlation factors against the market over 1-day, 1-week, 1-month, 3-month and 1-year time periods. Over the past year, North American stocks that have had the lowest correlation to the USD have had terrible performance. The decile of stocks with the lowest correlation to the dollar are down nearly 22% over the past year. What’s interesting is we have seen this relationship completely reverse over the past month. Stocks with highest correlation have had the worst performance (-1.6% over the past month) while stocks with the lowest correlation have had the best performance (+7% over the past month). This relationship has moved to other currencies as well. Stocks with the highest correlation to the euro have increased by 7.5% while stocks with the lowest correlation have fallen by -2.6%. Lastly, stocks with the highest correlation to the yen have increased by 7.1% over the past month while stocks with the lowest correlation to the yen have fallen by -2.8%. In the three tables below, this data is presented and all stocks are broken out into deciles.