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The Dollar Could Be Starting a Multiyear Bear Market

By Brett Eversole
Monday, September 18, 2017

The U.S. dollar's plunge has been one of the major financial stories of 2017...
 
The dollar soared from 2011 to 2016. But things changed this year.
 
The greenback recently hit its lowest level since early 2015. It has now clearly broken down from a multiyear uptrend. And history says this downtrend will likely continue.
 
The dollar could continue falling for another two years.
 
Let me explain...
 
Major currencies tend to move glacially. They have slow, long-term moves higher or lower... not drastic crashes or spikes.
 
So this year's decline isn't something that happens often. The dollar is down 9% in just the first eight months of the year – a massive fall for a major currency.
 
This is also a major break in the dollar's previous trend. Take a look...
 

This quick fall could be a sign of a much larger downtrend.
 
History says that this kind of decline – 9%-plus in eight months – means a new downtrend is here. And that's a bad sign for the dollar over the next few months... and potentially years.
 
Since 1980, similar quick dollar declines led to further declines over the next two years. The table below shows the full details. Take a look...
 
 
6-Month
1-Year
2-Year
After extreme
-1.6%
-4.7%
-7.0%
All periods
0.1%
0.2%
0.4%

Like many currencies, the dollar hasn't moved much over the long term. But large declines tend to lead to further falls.
 
After 9%-plus declines like we saw recently, the dollar went on to fall 1.6% in six months, 4.7% in one year, and 7% over the next two years.
 
That may not sound like much... But it's a huge fall for a world currency.
 
More important, this signal tells us that the dollar's decline will likely continue... potentially for years.
 
Now, in the short term, the dollar is overly hated by investors. And as contrarians, we know that could mean a bounce in the near future. But that's the short-term picture...
 
Today, the long-term trend is clearly down... And the recent decline we've seen points to more losses ahead, based on history.
 
This isn't all bad news... If we see a multiyear fall in the dollar, one way to profit is through foreign stocks. A falling dollar is a tailwind for stocks outside the U.S.
 
Gold also typically soars when the dollar falls. The metal has already entered a solid uptrend.
 
In any case, the greenback's decline could just be getting started. Don't be surprised if this is the beginning of a multiyear downtrend.
 
Good investing,
 
Brett Eversole




Further Reading:

When the dollar falls, gold tends to rise. And now, we're seeing another bullish signal for gold. The last time this happened, the metal soared more than 500%... To learn more, check out Steve's essay: This 'Stealth' Bull Market Could See Triple-Digit Gains.
 
A falling dollar is also a tailwind for foreign stocks. Recently, Steve revealed that billions of dollars could be about to flow into one Chinese company. It's the perfect example of why you need to be invested in Chinese stocks today. Read more here.

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
Mastercard (MA)... credit cards
PayPal (PYPL)... mobile payments
Square (SQ)... mobile payments
Alibaba (BABA)... Internet retail
Etsy (ETSY)... Internet marketplace
eBay (EBAY)... Internet auctions
Oracle (ORCL)... computer software
Adobe Systems (ADBE)... computer software
Microsoft (MSFT)... Windows, Office, Xbox
Procter & Gamble (PG)... everyday goods in your home
D.R. Horton (DHI)... America's largest homebuilder
Mohawk Industries (MHK)... world's largest flooring maker
Home Depot (HD)... "fixer upper" stock
Stanley Black & Decker (SWK)... tools and storage
Fiat Chrysler Automobiles (FCAU)... cars, trucks
CarMax (KMX)... used cars
Camping World (CWH)... recreational vehicles
J.B. Hunt Transport Services (JBHT)... trucking
Caterpillar (CAT)... heavy machinery
Consolidated Edison (ED)... one of the country's largest utilities firms
Coca-Cola (KO)... global soft-drink titan
Planet Fitness (PLNT)... low-cost gyms
Estée Lauder (EL)... makeup, skin care, fragrances
Abbott Laboratories (ABT)... Similac, Pedialyte, Ensure
AbbVie (ABBV)... prescription drugs
Waste Management (WM)... trash and recycling

NEW LOWS OF NOTE LAST WEEK
 

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