With a bumpy start to the year in stocks and a nice rally off the February 11 bottom, we are in and around the highs for the year in stocks. As the summer months approach, and with the seasonally weak periods in stocks, we turn our attention to what we call “The Big Three”: the Dollar, Oil and the Fed.
As we have mentioned in the past on these pages, the U.S. Dollar remains and will remain the world’s major reserve currency for the foreseeable future for a number of reasons. As a quick refresher, they are as follows: the vast majority of global trade happens in USD, approximately 64 percent of official foreign exchange reserves are in the currency, commodities such as oil and gold trade in USD and there is a military to back it up. Since oil among other commodities trades in U.S. dollars, we in the investment department need to be tuned in to the relationship between oil and the dollar AND the relationship between the dollar and the entity that controls the supply and demand for the currency, the Fed.