The long term dollar chart from early 70’s, as compared to US stock market CAPE ration has uncanny correlations. Anybody see it? I do.
When CAPE rises, dollar is strong (oil falls) . when CAPE flattens or falls (oil rises) , Dollar is weak.
- First Down Cycle was from 72 to 79 dollar fell fast as Gold standard was abandoned, it was the First cycle so EM stocks were all over the map, but most EM countries did well, much better than US stocks indexes.
- First up cycle was from 79 to 85, so was the dollar, give or take 6 months
- Second down cycle was from 86 to 95, EM stocks did extremely well ( around 600%) and US stocks also went up but not as well.
- Second up cycle was from 95 to 2001, US stocks did extremely well, EM suffered multiple crises.
- Third cycle down was from 2001 to 2011, lasting the longest. EM blew away US as it suffered a lost decade.
- third cycle up was from 2011 to early 2016, US stocks did very well but not like the past cycles, thanks to weak global growth and retiring baby-boomers. EM stocks should be starting the huge out-performance that should last thru 2023-4. as shown by BRF/EWZ, RSX/RSXJ