{"id":102971,"date":"2025-10-08T06:52:43","date_gmt":"2025-10-08T06:52:43","guid":{"rendered":"https:\/\/mycryptomania.com\/?p=102971"},"modified":"2025-10-08T06:52:43","modified_gmt":"2025-10-08T06:52:43","slug":"the-us-dollars-tailwind-boost-today-bust-tomorrow","status":"publish","type":"post","link":"https:\/\/mycryptomania.com\/?p=102971","title":{"rendered":"The US Dollar\u2019s Tailwind: Boost Today, Bust Tomorrow?"},"content":{"rendered":"

The first government shutdown in nearly seven years is delaying the release of key data at a time when the Federal Reserve is missing on both mandates<\/strong>.<\/p>\n

For the first time since late 2018, the federal government went into a partial shutdown<\/strong> when Congress failed to agree on a new funding bill for the fiscal year that started on October 1. The current shutdown is expected to extend at least into this coming\u00a0week<\/strong>.<\/p>\n

Shutdowns are typically non-events for the stock market<\/strong>. Looking back to the 1970s across 22 shutdown episodes, the S&P 500 has averaged a gain of 0.3% during the shutdown period and was up 54% of the\u00a0time<\/strong>.<\/p>\n

But this event could carry more weight for investors. That\u2019s because federal agencies won\u2019t be releasing key economic reports at a time when the Fed is starting to cut rates while missing on both mandates<\/strong>.<\/p>\n

While the September payrolls report was delayed, an ADP report on private sector payrolls showed 32,000 jobs lost during the month<\/strong> (chart below) compared to expectations for a gain of\u00a045,000.<\/p>\n

There\u2019s also more evidence in recent reports that consumer inflation will keep increasing<\/strong> in the months ahead, and could be exacerbated further by the historic weakness in the U.S. Dollar\u00a0Index<\/strong>.<\/p>\n

Nonetheless, markets are fixated on the prospect that the shutdown and potential furlough of hundreds of thousands of workers will present additional risks to the economy. That\u2019s locking in forecasts for further rate cuts in the months\u00a0ahead<\/strong>.<\/p>\n

I maintain that this has been a slow to hire and slow to fire jobs environment, which could improve as the fog from the trade war is lifting. A strong economy coupled with rate cuts and loose financial conditions should add upside pressure to inflation in the coming\u00a0months<\/strong>.<\/p>\n

But for now, the rate backdrop and investor positioning remains a tailwind for the bull market<\/strong>. This week, lets unpack the growing challenges to the inflation outlook and how the dollar could play a key role<\/strong>. We\u2019ll also examine the upside in gold stocks, and why the \u201cdumb money\u201d is adding more fuel for the\u00a0rally<\/strong>.<\/p>\n

The Chart\u00a0Report<\/h3>\n

Even though the government shutdown is delaying the September payrolls report, other data continues showing weakness in the labor market. That includes the ADP report and JOLTs survey that shows more unemployed workers than job openings<\/strong>. While concerns over the labor market take the spotlight, inflationary pressure remain a huge issue and could push consumer prices higher in the months ahead<\/strong>. The ISM Services PMI showed the prices paid component staying at a high level, and was reported at 69.4<\/strong> in September (where a reading above 50 indicates expansion). Prices paid (blue line) measures changes in input prices for services organizations, and tends to lead changes in the Consumer Price Index<\/strong> (CPI\u200a\u2014\u200aorange line) as you can see in the chart\u00a0below.<\/p>\n

Currency debasement could present additional inflation pressures in the months ahead. The U.S. Dollar Index is having a historically bad year, and remains down about 10% year-to-date<\/strong>. That\u2019s a significant decline for the world\u2019s most important currency, where a weaker U.S. dollar increases the cost of foreign imports<\/strong>. While there\u2019s a lag effect, those rising prices tends to show up in consumer inflation gauges. The Fed\u2019s own modeling shows that a 10% decline in the dollar adds about 0.3% to inflation<\/strong>. The chart below plots CPI against a dollar index, which is inverted to show the positive correlation with\u00a0CPI.<\/p>\n

While the weaker dollar could spark more inflation ahead, a falling dollar tends to boost risk assets<\/strong>. Everything from stocks to commodities tends to see a tailwind from a weaker dollar for various reasons. Domestic large-cap stocks that receive a large portion of revenues from international regions typically experience an earnings bump from a falling dollar<\/strong>. Commodities are often priced and traded in dollars, where a weak dollar increases the purchasing power of non-U.S. buyers<\/strong>. The chart below shows the correlation over recent time frames for various assets to the dollar, where a negative correlation has been a tailwind for everything from the S&P 500 to gold and\u00a0silver<\/strong>.<\/p>\n

Chart from Realinvestmentadvice.com<\/p>\n

While hype (and valuations) around artificial intelligence (AI) stocks like Nvidia continues running high, precious metals and related mining stocks are among 2025\u2019s leaders<\/strong>. Gold prices are up 46% this year, while silver has gained 63%. That\u2019s fueling mining stocks as well, with the VanEck Gold Miners ETF (GDX) up 127% this year as high metal prices boosts earnings and the outlook for more growth<\/strong>. The chart below plots an index of gold mining stocks (white line) along with trailing 12 months earnings per share (blue line). Earnings in mining companies are actually expanding quicker than stock price appreciation, which is keeping a lid on mining company valuations<\/strong>.<\/p>\n

Chart from Tavi Costa on\u00a0X<\/p>\n

The stock market continues climbing the \u201cwall of worry.\u201d<\/strong> Despite concerns over the health of the labor market and economic impact of the government shutdown, the S&P 500 is hovering near record highs and has spent 108 consecutive days trading above its 50-day moving average<\/strong>. But investors have collectively been slow to add equity exposure, with various measures of sentiment and positioning data showing mostly neutral readings<\/strong> at a time when you\u2019d expect bullishness to be running high. By some measures, it\u2019s even the opposite. S&P 500 stock index futures positioning shows a relatively large net short position by large speculators<\/strong>. They\u2019re considered to be the \u201cdumb money\u201d in the data series, and are pushing bets against the S&P 500 to levels that you tend to see around major market\u00a0lows<\/strong>.<\/p>\n

Heard in the\u00a0Hub<\/h3>\n

The Traders Hub features live trade alerts, market update videos, and other educational content for\u00a0members<\/strong>.<\/p>\n

Here\u2019s a quick recap of recent alerts, market updates, and educational posts:<\/p>\n

Why valuations don\u2019t matter (and when they\u00a0do).<\/strong>The rally off the April lows remains under-owned.<\/strong>Growing stock market similarities to the internet\u00a0bubble.<\/strong>Why the weak U.S. dollar is another catalyst for rising inflation.<\/strong><\/p>\n

You can follow everything we\u2019re trading and tracking by becoming a member of the Traders\u00a0Hub<\/strong>.<\/p>\n

By becoming a member, you will unlock all market updates and trade alerts reserved exclusively for\u00a0members.<\/p>\n

\ud83d\udea8Hub members are <\/em>now up over 100% on a gold mining stock<\/em><\/strong> we added in March. Check out the special offer below to join the Hub\u00a0today.<\/em><\/p>\n

\ud83d\udc49You can <\/strong>click here to join\u00a0now<\/strong><\/a>\ud83d\udc48<\/strong><\/p>\n

Trade Idea<\/h3>\n

Symbotic (SYM)<\/p>\n

Robotics stock coming back to test the prior high near $63 on a couple occasions since August. Each pullback off that level is getting smaller, with a recent MACD reset at the zero line. I\u2019m watching for a mover over $63 on expanding volume.<\/p>\n

Key Upcoming\u00a0Data<\/h3>\n

Economic Reports<\/em><\/p>\n

Earnings Reports<\/em><\/p>\n

I hope you\u2019ve enjoyed The Market Mosaic, and please share this report with your family, friends, coworkers\u2026or anyone that would benefit from an objective look at the stock\u00a0market.<\/p>\n

Become a member of the Traders Hub<\/strong> to unlock access\u00a0to:<\/p>\n

\u2705Model Portfolio<\/strong><\/p>\n

\u2705Members Only\u00a0Chat<\/strong><\/p>\n

\u2705Trade Ideas & Live\u00a0Alerts<\/strong><\/p>\n

\u2705Mosaic Vision Market Updates +\u00a0More<\/strong><\/p>\n

Our model portfolio is built using a \u201ccore and explore\u201d approach, including a Stock Trading Portfolio and ETF Investment Portfolio.<\/p>\n

Come join us over at the Hub as we seek to capitalize on stocks and ETFs that are breaking\u00a0out!<\/strong><\/p>\n

Come join the\u00a0Hub!<\/a><\/p>\n

Disclaimer: these are not recommendations and just my thoughts and opinions\u2026do your own due diligence! I may hold a position in the securities mentioned in this\u00a0report.<\/em><\/p>\n

The US Dollar\u2019s Tailwind: Boost Today, Bust Tomorrow?<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":"

The first government shutdown in nearly seven years is delaying the release of key data at a time when the Federal Reserve is missing on both mandates. For the first time since late 2018, the federal government went into a partial shutdown when Congress failed to agree on a new funding bill for the fiscal […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-102971","post","type-post","status-publish","format-standard","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/102971"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=102971"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/102971\/revisions"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=102971"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=102971"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=102971"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}