The Story About the Dollar that Few Are Paying Attention To

Everyone’s talking about Nvidia after its monster earnings report. But that’s not where we should be focused. Instead, we need to focus on what’s happening with the U.S. dollar… And how it can impact your investment portfolio. For a transcript of this video, see below. This transcript has been lightly edited for length and clarity. […] You’re receiving this email as part of your subscription to Andrew Zatlin’s Moneyball Daily [Unsubscribe]( [Moneyball Daily] The Story About the Dollar that Few Are Paying Attention To February 23, 2024 Everyone’s talking about Nvidia after its monster earnings report. But that’s not where we should be focused. Instead, we need to focus on what’s happening with the U.S. dollar… And how it can impact your investment portfolio. [CLICK HERE TO LAUNCH VIDEO OR READ THE FULL TRANSCRIPT BELOW »»]( For a transcript of this video, see below. This transcript has been lightly edited for length and clarity. The Story About the Dollar that Few Are Paying Attention To The U.S. dollar is getting stronger. That may not mean much to the average American. But it’s incredibly important if you’re in the stock market. Let me explain why the dollar is strengthening… how this newly-gained muscle impacts the world economy… and what it means for your investment portfolio. This Is What Happens When the Dollar Strengthens Let’s start with the economics behind the dollar. When the dollar gets stronger, any company doing business overseas is put at a disadvantage. More specifically, it becomes less competitive. As a result, sales go down, and so does profitability. At the same time, when those overseas sales get repatriated, they come in at a higher dollar level, which essentially means sales are made at a lower valuation. Simply put, a stronger dollar means companies experience lower sales, lower profits, and lower stock prices. Why are we seeing a stronger dollar? It’s Politics, Baby Simple: this is an election year. You see, the key to Joe Biden’s re-election comes down to a strong economy and low inflation. But here’s the thing: The government has secretly been achieving this lower inflation by manipulating the exchange rate and driving a higher dollar. Let me show you what I mean: This is the value of the U.S. dollar compared to the value of the Japanese yen (Japan is one of our top trading partners). Over the past year, the U.S. dollar has gone up a whopping 15% in value compared to the yen. And believe it or not, it’s done the same against the value of the Chinese yuan: What’s happening is the U.S. is tinkering with exchange rates and creating an environment where inflation is dropping. But now we’re running into a problem… Countries are Struggling Globally, countries are stumbling economically. And that has an impact on the dollar. Consider, for example, the fictional country of “Freedonia.” Freedonia’s economy is hurting. And to give it a boost, the country’s leaders slash interest rates to hopefully get its citizens spending more. But the ripple effect of this is that when a country drops interest rates, the U.S. dollar gets even stronger. And that’s what we’re seeing everywhere we look. China, Germany, and the UK are all looking to jump-start their sluggish economies. And all of them want to trim interest rates. Perhaps surprisingly, that’s just what the Federal Reserve wants them to do… You Have the Fed’s Support You see, the Fed is wrestling with its own interest rates. Does it raise rates? Does it keep rates steady? Or does it consider rate cuts? So far, we’ve seen that the Fed is gun shy when it comes to lowering interest rates. But given the relationship between the U.S. dollar and other countries’ interest rates, it doesn’t necessarily have to lower its own rates. If other countries can lower their interest rates, it makes the U.S. dollar even stronger. And the Fed doesn’t really have to do anything. Furthermore, a lowering of foreign interest rates means the Fed can swoop in later and announce a rate cut of its own. And if it waits long enough, that rate cut won’t impact the actual economy (because the dollar’s value will already have been adjusted when the foreign country’s interest rate falls). But it will still be welcome news to those on Wall Street… And news of a rate cut could send the stock market rallying. Here’s My Advice Truthfully, we don’t have a crystal ball. But it’s important to understand the ripple effects connected to the rise and fall of the value of the dollar. As investors, a rising dollar means we should avoid multi-national companies. After all, any company with exposure to offshore sales will suffer from a strengthening currency. We’re in it to win it. Zatlin out. In it to win it, [Andrew Zatlin] Andrew Zatlin Moneyball Economics Copyright 2024 © Moneyball Economics, All rights reserved. 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