US$ has continued its dive towards the long-term trend in the 65-70 range using this Trade Weighted Index.Mohnish Pabrai On Value Investing, Missed Opportunities and Autobiographies
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
I do not predict when the trend-level will be reached, but am surprised with the recent acceleration towards normalization.
The inverse correlation to WTI$ appears to have been reestablished. The inverse relationship is a combination of global trade economics and market psychology which is too complex to predict with any precision. My guess is it will continue to strengthen considering the nature of Momentum Investors. Net/net you should see benefits begin to build for those companies with sensitivity to US$, i.e. most US manufacturers and commodity related.
We should expect $WTI to rise along with other commodities which are US$ priced. As this occurs, many will believe inflation is returning and market psychology will pile many into commodity related companies. We should expect higher markets, perhaps sharply higher as a major theme builds which converts many who are sitting in Fixed Income back into Equities to avoid the perceived ravages of inflation.
Portfolios need to be exposed to the effects on markets associated with a weakening US$ in my opinion.