You can count Barclays in the camp that thinks the U.S. equity rally has further to run through year end.
Earlier this week, the S&P pushed to a fresh all-time high amid a five-day losing streak in the dollar, which helped reignite global risk sentiment.
Why mention the dollar there? Well, because going forward, a weaker dollar could indirectly help sustain the stateside rally by helping to mitigate the headwinds facing ex-U.S. assets and thereby heading off a scenario where international turmoil finally boomerangs back to Wall Street.
U.S. fiscal policy is at the heart of recent dollar strength. Late-cycle stimulus raises the specter of an inflation overshoot, prompting hawkishness from the Fed, which in turn moves rate differentials in favor of the greenback. Meanwhile, the sugar high from that same stimulus leads to divergent growth outcomes with the U.S. economy firing on all cylinders while the rest of the world labors under the threat of a trade war. In emerging markets, dollar strength forces developing economy central banks to hike rates in order to protect their currencies, but those hikes serve to dampen domestic growth.
(Aside: there are a number of other USD+ dy
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