The long-term consequences of primary FX trends may be entirely unintended.
Indulge me two “I told you so’s”:
1. That the U.S. dollar (USD) would rise a lot, confounding those busily digging the dollar’s grave
2. That the stronger dollar would crush U.S. corporate profits earned overseas, negatively impacting U.S. stock valuations and markets.
My call for a significantly stronger USD goes back four years:
Could the U.S. Dollar Rise 50%? (January 12, 2011)
What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012)
The Tailwinds Pushing the U.S. Dollar Higher (March 27, 2013)
About Those Permanently Rising Corporate Profits…Â (August 12, 2011)
My call for the stronger dollar impacting corporate profits also goes back four years:
What If Corporate Earnings Have Topped Out? (January 8, 2013)
The Rising U.S. Dollar Will Be Corporate Earnings/Market-Negative (January 9, 2013)
Why the Shrinking Trade Deficit Will Choke U.S. Corporate Profits (August 8, 2013)
There may be plenty of other people who made the same calls as early and as consistently as I have, but I haven’t run across their archives.
More important than the call itself is explaining the causal dynamics that made the stronger dollar inevitable. That’s where the rubber meets the road: why will this happen? If we get that right, the call will be right.
More recently, I’ve discussed the consequences of a stronger dollar globally:
Why the Rising U.S. Dollar Could Destabilize the Global Financial System (November 13, 2014)
In effect, the failure to address the structural problems that caused the Global Financial Meltdown of 2008-2009 have been transferred to the larger foreign-exchange (FX) market, which is connected to virtually everything in the global economy.
The FX market is not as easy to manipulate as stock and bond markets, due to its size and the inter-connectedness of interest rates, FX, perception of risk and global capital flows.
