Premarket Stocks: USD Strong, But Something’s Wrong

But something strange is happening during this ascent. The dollar now appreciates against the currencies of wealthy countries more than against those of emerging countries.

Investors looking for big returns on government debt often look to risky developing countries that pay high interest rates. When the Federal Reserve raises interest rates, investors find that they can take that payout risk-free and move their money to the US instead. This boosts the dollar, but also plunges developing world currencies.

But emerging market central banks are tightening this time around, just like advanced economies. keep interest rates relatively lowSo the rules have changed. Add to that growing fears of a war-induced recession in Europe, and investors are pouring money into the dollar.
problem Ahead: Euro hits 20-year low against the dollarand the British pound is at its lowest level since 1985 against the dollar.

The Fed’s trade-weighted dollar index, which measures the value of the US dollar based on its competitiveness with trading partners, has risen 10% this year against other developed world currencies, its strongest level since 2002. The dollar has risen by comparison. Only 3.7% against emerging market currencies.

This change adds a lot of challenges Inflation is already rising in Europe as a continent heading to winter An energy crisis is looming. Japan’s energy import prices are also rising, worsening for the dollar. Most of the top companies in the S&P 500 have strong global footprints, and not all of them are exciting.
The cycle continues: Fed officials probably Continue rate hikes until 2023, so don’t be a little relieved. Chief global strategist Quincy Crosby said: “Especially when the European Central Bank (ECB) meets this week to raise interest rates for a second time to counter rising inflation in the eurozone. If not, the dollar could rise further.” For LPL Financial.

Bad for Business: Globally active S&P 500 companies will also have to contend with a strong dollar that is hurting earnings growth. According to Krosby, about 30% of the S&P 500 companies’ revenues come from markets outside the United States. At the end of the financial year, many companies said the strong dollar was already hurting their sales growth.

LPL Financial estimates that the stronger dollar took 2-2.5 percentage points off the S&P 500’s earnings in the second quarter.

To the point: Crosby said the dollar should stop accelerating once the Fed stops raising rates. But there are external forces that can keep the US dollar high even after the FOMC is over. It also reflects investor concerns about the impending recession in Europe. They are flocking to their safe haven, the dollar, at least for now. Expect the USD to stay strong for some time.

What the Federal Reserve does not say out loud.

The Federal Reserve is notorious for being cautious with its words. Billionaire investor David Rubenstein has some thoughts on what central banks really want.

Rubenstein I told my colleague Matt Egan Last week, Federal Reserve Chairman Jerome Powell said he wanted a higher unemployment rate, even if he couldn’t say it publicly.

“He can’t say this for sure, but if unemployment goes up to 4%, 5% or 6%, inflation will [probably] Rubenstein spoke of Powell, whom he hired a quarter century ago to work in private equity. It seems politically unappealing to say that. ”

Unemployment fell to 3.5% in July, Lowest level since 1969As the unemployment rate approaches 6%, there will be mass layoffs.

“Many jobs will be lost. The Fed is not going to say publicly, ‘We want to lose jobs,'” Rubenstein said.

Mr. Rubenstein said Mr. Powell was “a very smart, hard-working man” but underestimated how bad inflation could get. There’s something to think about: “Alan Greenspan was almost a god. Paul Volcker was almost a god. But these people put their pants on one leg at a time. They make mistakes.”

Keeping up with private equity

Only one person can take Jerome Powell’s current notoriety away: Kim Kardashian. Now she has entered his territory and is coming to Wall Street.

Kim K. partnered with former Carlyle Group executive Jay Sammons to SKKY Partnersreport my colleague jordan valinskiThe company invests in fast-growing companies across multiple sectors including hospitality, media and consumer products.
The pair will acquire both majority and minority stakes in the company, they said. wall street journal“The exciting part is to sit down with these founders and figure out what their dreams are,” Kardashian told the journal. I just want to support and take them to another level instead of changing who they are in their DNA.”

Momage to the stars, Kris Jenner will also join SKKY as a partner.

Kim may be best known for her reality show, but in recent years she’s proven her business acumen: Kardashian started her acclaimed apparel business, Skims. about $3 billion Following a new round of funding earlier this year.

I hope in our future there will be a spin-off where Kim takes on the reality of Wall Street.


RH (RH) When docusign (document) Report earnings after the bell.

today too →

▸ Fed Chairman Jerome Powell will speak at the Kate Institute at 9:10 am ET.

▸ European Central Bank Interest Rate Decisions.

Coming tomorrow: China’s inflation rate has been released. The EU will meet on the energy crisis. Kroger (Korean) Report earnings.


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