Dollar’s Relationship With Stocks May Reverse on Stimulus Bets
- The U.S. fiscal package will crimp demand for haven assets
- Dollar index has risen on average about 1.7% in fourth quarter
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The dollar’s positive correlation with U.S. equities may break this quarter due to a drop in its carry-trade appeal and a possible fiscal stimulus package.
Data from the last 10 years show the Bloomberg Dollar Spot Index has risen on average about 1.7% in the fourth quarter and the S&P 500 Index has advanced 1.9%, with the index usually outperforming its foreign counterparts. However, seasonal patterns seen in currencies have shifted in 2020 amid the onslaught of the global pandemic, and with this being an election year the correlations may break even further. The dollar was little changed after rising as much as 0.2% Tuesday.