Should you be worried about the rising U.S. Dollar?

The U.S. Dollar Index has been going up over the past 5 months, driven higher by Trump’s trade war.

This has some stock market traders worried, because economic theory states that “a rising U.S. Dollar is bad for the economy and stock market”.

 

 

I demonstrated last year that a rising U.S. Dollar isn’t consistently bearish for the U.S. stock market. We can look at this from another angle.

The U.S. Dollar’s year-over-year rate of change has exceeded 4% for the first time in 1 year.

 

Historically, the U.S. Dollar’s forward returns are mostly random.

 

But on a more interesting note, the S&P 500’s medium-long term returns (6+ months) are actually consistently bullish when the USD goes up!

 

Conclusion

There are several things that medium-long term traders should worry about: namely, the fact that it’s hard for the U.S. economy to get much better. However, a rising U.S. Dollar isn’t one of those worries.