Trade-Weighted Dollar Index Breaks Below Long-Term Support

Trade-weighted dollar index is in a secular bear market

Highlights

• Trade-weighted dollar index is in a secular bear market

• Stock valuations look stretched however you slice it

• Dovish guidance is increasingly risky for the Fed

• Momentum indicators are peaking out for Technology indices

Key Takeaways

• Stock Valuations Appear Overstretched: From the pre-COVID peak, earnings have gone up by +40%, but the S&P 500 has more than doubled that performance since its pre-pandemic high — it is up +90%. Peak to peak. The CAPE multiple has expanded by +7 full points over this time frame, even though real risk-free interest rates have jumped nearly +200 basis points.