The dollar’s rise is unstoppable.
After a strong summer, the US dollar, despite a recent dip following France’s left-wing electoral victory, remains robust. Currently, it’s about 13% stronger compared to 2021, before the Federal Reserve’s interest rate hikes began.
While great news for American tourists enjoying their European escapades, this surge spells trouble for the multinational giants dominating the S&P 500.
What’s Driving the Dollar’s Ascent
The dollar’s latest surge is politically charged, yet the Federal Reserve’s actions lie at the core. Recent polling shows former President Donald Trump pulling ahead of President Joe Biden. If Trump wins in November, expect expanded tax cuts and increased tariffs.
During the latest debate, Trump reiterated his plan for a 10% tariff on all imports, which could stoke inflation and cast doubt on rate cuts.
Morgan Stanley’s Lisa Shalett notes that markets, which had largely ignored political rhetoric, are now reacting. “Bond volatility is spiking,” she said, highlighting concerns over tax cuts, tariffs, and closed borders.
Morgan Stanley’s research suggests that extending the 2017 tax cuts would balloon deficits, pushing the dollar higher.
Meanwhile, sluggish growth in European and Asian currencies has further boosted the dollar.
The resilient US economy, in the face of high inflation and interest rates, stands in contrast to a eurozone recession and economic setbacks in China and Japan.
The Bigger Picture
Louis Navellier of Navellier & Associates explains, “The US dollar’s strength signals confidence in an economic recovery.” However, this has a downside. “A strong dollar can hinder large multinationals but benefits smaller, domestic companies.”
With second-quarter earnings expectations high, there’s concern about the dollar’s impact. A strong dollar makes US exports pricier and reduces overseas profits when converted back to dollars.
It also intensifies competition from cheaper imports, potentially boosting inflation and hurting foreign business investments.
Financial Health and Early Dementia
Financial chaos, late payments, and unusual purchases can signal early dementia, reports Jeanne Sahadi.
Research from the New York Federal Reserve shows declining credit scores and rising payment delinquencies years before a dementia diagnosis.
These financial missteps add to the pressure on households already grappling with a diagnosis. Early-stage memory disorders can affect new account openings, debt accumulation, and credit utilization.
Boeing’s Legal Turbulence
Boeing will plead guilty to conspiracy to defraud the US over two fatal 737 Max crashes, says the Justice Department. While this avoids harsher penalties, it adds another blemish to Boeing’s safety record.
Boeing will pay up to $487 million in fines, a fraction of the $24.8 billion sought by crash victims’ families.
This agreement, which includes three years of oversight by an independent monitor, falls short of satisfying the families, highlighting Boeing’s tarnished reputation.
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