GLOBAL ECONOMICS AND POLITICS
Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.
Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.
Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.
Subscribe to Leo Haviland’s BLOG to receive updates and new marketplace essays.
Patrick Henry, one of America’s political “Founding Fathers”, is remembered for orations such as his 1775 one: “Give me liberty or give me death!” In a March 1799 speech, in regard to the Virginia and Kentucky Resolutions, he declared: “United we stand, divided we fall. Let us not split into factions which must destroy the union upon which our existence hangs.”
****
CONCLUSION
The Federal Reserve releases a real Broad Dollar Index (H.10; January 2006=100; monthly average) as well as a nominal Broad Dollar Index (daily data) covering both goods and services. These Indexes are useful measures of overall United States dollar strength (weakness) and trends. “As the World Turns: Marketplace Battlefields” (1/1/25) noted: “Though the ‘overall’ United States dollar may remain strong for a while longer due to relatively lofty US interest rates, the real Broad Dollar Index probably will begin to decline from around current levels, which have reached the major resistance barriers of autumn 2022. It eventually will retreat toward its key support at April 2020’s 113.4 elevation (recall also December 2023’s 113.9).” “Shakin’ All Over: Financial and Political Turmoil” (4/1/25) emphasized: “The real Broad Dollar Index probably peaked in January 2025 and likely will continue to decline over the long run.”
The real Broad Dollar Index attained its summit in January 2025 at 122.6, and the nominal Broad Dollar Index peaked at 130.2 on 1/13/25. Through September 2025, the real Broad Dollar Index has depreciated about 6.6 percent from its January 2025 high, and the nominal Broad Dollar Index has descended 8.1 percent. The percentage depreciation and time duration of the decline in the real Broad Dollar Index since January 2025 has been significantly less than that of past major bear moves in the dollar. The US dollar probably will continue to depreciate. Though marketplace history of course does not necessarily repeat itself, either entirely or even partly, this dollar bear move probably will be fairly substantial and may last several years. Thus the real BDI probably will decline beneath April 2020’s important support at 113.4. Competitive depreciation may mitigate the US dollar’s long run decline, but it will not avert its fall.
FOLLOW THE LINK BELOW to download this article as a PDF file.
All Along the Watchtower- US Dollar Depreciation (10-1-25)
“The Great Game: the Story of Wall Street….An original two-hour documentary event that spans the 200-year history of American capitalism.” NYTimes (over 20 years ago; 5/28/00; p13) regarding a CNBC television program broadcast 5/29/00
CONCLUSION
Financial marketplace investors, speculators, traders, hedgers, analysts, risk managers, and media have enjoyed, endured, or suffered an adventurous 2020! Substantial ongoing political and other cultural divisions and associated conflicts in the United States and elsewhere intertwined with and often enhanced the marketplace circuses. The coronavirus pandemic and the feverish economic (political) responses to its actual and potential ravages of course magnified agitation within marketplace playgrounds.
What are several key existing marketplace patterns worth watching by marketplace players as 2020’s finish line nears and calendar 2021’s competitions beckon?
First, prices in the S+P 500 and other benchmark US and global stock indices, lower-grade interest rate instruments within corporate fields ( and low-quality foreign dollar-denominated sovereign debt), and commodities “in general” often have risen (or fallen) at roughly the same time. They generally have climbed in significant bull ascents (and fallen in noteworthy bear retreats) “together”. These entangled domains thus have alternatively reflected joyous bullish enthusiasm as “investors” and other traders hunted for adequate return (“yield”), and scary bearish scenes as they scrambled frantically for safety. Whether the existing bull trend for American stocks in general (use the S+P 500 as a benchmark) persists is especially important for these connected landscapes.
Despite strenuous yield repression by the Federal Reserve Board and its central bank teammates, United States Treasury yields, using the UST 10 year note as a signpost, probably have commenced a long run increase. Despite widespread global desires for a sufficiently feeble home currency to promote economic recovery and growth, and the related willingness to engage in competitive depreciation to accomplish this, spring 2020 unveiled the onset of substantial US dollar weakness. Although the US dollar (using the Fed’s “Broad Dollar Index” as the yardstick) already has dived about ten percent from its peak, its long run pattern probably will remain down.
FOLLOW THE LINK BELOW to download this article as a PDF file.
Games People Play- Financial Arenas (12-1-20)
The broad real trade-weighted United States dollar (TWD) not only will remain relatively weak, but also it probably will test its July 2011 bottom around 80.5 in the relatively near future.
Within and between currency, interest rate, stock, and commodity domains, observers debate marketplace intertwining, convergence/divergence, and lead/lag relationships and issues. In any event, since the economic crisis walked onto the world stage in mid-2007, and especially after its acceleration during 2008, many marketplace gurus ardently have promoted the guideline that a “weak US dollar equals strong US (and many other) stock marketplaces, strong dollar equals weak US stocks”. This beloved relationship probably no longer holds. In the current theater, the weak US dollar (and any further deterioration in it) now probably translates into falling American stock marketplace prices (use the S+P 500 as a benchmark). In addition, a still-relatively weak TWD (one not sustaining a venture much above its June 2012 peak at 86.3) will not bolster equities much if at all.
In recent months, and especially in the past several weeks, US dollar cross rates have displayed competing perspectives regarding dollar strength. Thus the dollar sometimes appears to be walking a tightrope. The US dollar has rallied recently against the currencies of many developing (and some rather developed) nations and assorted emerging marketplace nations. Several of these domains represent key commodity producers. However, the US dollar has eroded in recent weeks against the currencies of several of its major trading partners such as the Japanese Yen and Euro FX. The dollar remains relatively feeble against the Chinese renminbi as well. This weakness in these key crosses underlines not only the current weakness in the TWD, but also warns that the TWD is quite vulnerable to renewed declines. Moreover, falls of the US dollar in these key crosses (as does the weakness in the TWD in general) indicate that further declines in the US stock marketplace loom ahead (despite the Federal Reserve’s longstanding accommodative policies.
This viewpoint on intertwined US dollar and US equity weakness fits the stories of the dive in emerging marketplace equities (which began in 4/27/11; the “MSCI emerging stock markets index”/MXEF at 1212) and the fall in commodity prices (broad Goldman Sachs Commodity Index’s major downtrend commenced in spring 2011 with the 4/11 and 5/2/11 highs at 762), as well as the bear trend in US government notes. Yields for the 10 year UST bottomed 7/25/12 around 1.38pc; they established other important floors at 1.55pc (11/16/12) and 1.61pc (5/1/13). Note the fall in the MXEF from its 5/9/13 high around 1065 alongside the rise in US rates (especially from the 5/1/13 depth) in the context of the slump in many emerging/developing/commodity producing marketplace cross rates versus the dollar. Keep in mind the timing links (similar directional moves) in recent years between the MXEF and the S+P 500 (even though the S+P 500 climbed to new highs after spring 2011). The renewed faltering in emerging stock marketplaces in recent weeks warns of a notable fall in the S+P 500.
The S+P 500’s high on 5/22/13 near 1687 probably represents (or is very close to) a very significant high.
FOLLOW THE LINK BELOW to download this market essay as a PDF file.
Seeking Directions- US Dollar Retreats, Advances, and Relationships (6-14-13)
Japanese Yen versus US Dollar Chart (6-14-13)
View Leo Haviland’s profile