Stocks Synced With Dollar Most Since 2008 on Fed Bets: Options
?by Joseph Ciolli
(Bloomberg) — U.S. stock and currency investors are more in sync than at any point in the six-year bull market.
The Standard & Poor?s 500 Index is trading in the closest lockstep since 2008 versus an exchange-traded fund that rises as the U.S. dollar gains. ETFs tracking the benchmark equity gauge and the greenback were inversely correlated for the first five years of the bull market, only turning positive last year after the Federal Reserve started scaling back its stimulus program.
With the Fed no longer expanding the U.S. money supply, and as foreign central banks from the euro region to Japan continue to ease, the dollar is surging to its strongest levels in more than 10 years. While the Fed is expected to continue its tightening process through a rate increase this year, investors are focusing on better-than-estimated labor data as a reason to continue buying U.S. equities, according to Kevin Caron of Stifel Nicolaus & Co.
?The market is focusing less on the potential negative effects of higher interest rates, and more on the fact that the U.S. economy is growing nicely compared to the rest of the world,? Caron, a market strategist and portfolio manager who helps oversee $170 billion at Stifel Nicolaus & Co. in Florham Park, New Jersey, said in a Feb. 10 phone interview. ?That?s encouraging investment flows into the U.S. and supporting the dollar.?
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