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Dollar, the main driver of S&P 500 rally?

June 5, 2020

June 5, 2020

The dollar did it!Dmitri Demidenko

Is Greenback the reason for US stock market madness?

When the US stock market recovered after the 2009 crisis, they called it “the most hated rally in history”. Back then, most investors became hostages to their own scepticism as they had believed that a recession that large would make [S&P 500][1]  collapse much deeper than it actually did.

The current recovery of US stock indexes has lasted for about 10 months, but it has already become a new “most hated rally”. The markets are far from reality, shares go off like hot cakes and S&P 500 behaves like a true woman. Women usually prefer being beautiful to being smart because men usually prefer watching to thinking.

![LiteForex: Dollar, the main driver of S&P 500 rally?][2]

FOMC officials, Wall Street Journal experts, Ways and Means Committee and other competent organisations say that a V-shaped economic recovery is no longer a matter of fact, but the market doesn’t want to search for any other letters. The unemployment rate soared to 20%. The States plunged into the deepest recession since the Great Depression. Donald Trump continues putting pressure on China and Beijing halts imports of US agriculture products. But [S&P 500][1] pays no attention to geopolitics, recessions or mass protests:

- Listen! Don’t even try using fake money in shops.

- They won’t strangle me for that and start a revolution, will they?

![LiteForex: Dollar, the main driver of S&P 500 rally?][3]

If the number of new coronavirus cases isn’t rapidly growing amidst US riots in the next few days, it will be really suspicious. The Fed representatives hint at new stimulus packages and a W-shape recovery that the second epidemic wave will lead to. However, when stocks grow so fast, the sense of fear vanishes. Many are afraid of missing out on the opportunity to buy and they just buy, and buy, and buy.

Mom would tell me you’re an idiot.  Your own mom!

Some things make no sense: in the market there are rumours that the main reason for [S&P 500][1]’s rally was the weakness of the USD. They say the fall of the USD index boosts US companies’ competitiveness and their corporate profit. But for that to be true, there must be a time lag between the two events. I’d rather believe that stocks buying increased the share of dollars in investment portfolios as the USD is a tool hedging against a poorer global appetite for risk. The appetite didn’t and will hardly get worse as the global economy is recovering. So, they are just getting rid of the greenback. But isn’t it too early?

![LiteForex: Dollar, the main driver of S&P 500 rally?][4]

The higher euphoria, the stronger disappointment. Beware! [S&P 500][1] still has many reasons for falling and bulls may be duped at any moment.

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Price chart of SPX in real time mode

![The dollar did it!][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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