After storming furiously off their lows, the major indices are all up for the year now. But at the same time, the dollar has weakened considerably, amid fears of inflation, but also the letting out of the panic premium.
A user at Ticker-Forums has put together a few simple charts showing the S&P 500 were it denominated in a foreign currency — something that’s useful to do from time to time. As you can see, the bounce off the lows is not quite so impressive, we’re not up for the year in any of the other currencies, and we’re already noticeably off our recent peak.
On the other hand, we don’t buy stuff in Euros or Pounds, typically, do we? And though the dollar’s weakened, there hasn’t been a significant move higher in domestic prices. So charts like these are only so meaningful. Still, they’re worth perusing to get some perspective.
Something to keep in mind, too, is that a few of these currencies have had very real reasons for moving higher. Aussie Dollars and Canada have really rode the rebound in commodities. The Pound is highly levered (much more than us) to the survival of the banking system. Meanwhile the Euro is not particularly tied to any of those things, and hence it’s the one that’s punishing us the least.
Bottom line, what some assume to be a lack of confidence in the dollar may really be a rebound in confidence against certain volatile currencies, and again the overall loss of fear.
First up, the S&P to British Pound
Next, the S&P to Aussie Dollar
Next, the S&P to Euro
And finally, to our neighbours up north, Canada.