A rising dollar environment

We wanted to spend some time on the US Dollar — to provide you with an updated view both short term and longer term on its technical picture, and the implications of its historical price movements. We find now is a very important time to delve into the behavior of the “greenback,” as it has very much been in the news.

Charles Tumlin
Charles Tumlin

The US Dollar has been newsworthy so far in 2015, as it has posted an eye-popping gain, taking it to levels not seen since September 2003, or 11 1/2 years. This bullish story for the dollar has been going on since May 2011, as it has been in a “rising dollar environment” since May 4th, 2011, making it now the longest rising dollar environment since we’ve been tracking this currency.

Relative Strength has helped to keep us invested where the potential for strength is. Historically, US Equities, and Small- and Mid-Cap stocks in particular, tend to outperform the market in a rising dollar environment. Our portfolios have been overweight small and midcap US equites since 2012 and underweight International Equities since 2012.

This is in contrast to strategic asset allocation strategies, which maintain static allocations to all asset classes, even when Relative Strength tells us to avoid or underweight an out of favor asset class.

This article was written by Dorsey, Wright and Associates, Inc., and provided to you by Wells Fargo Advisors and Charles Tumlin, Financial Advisor in Beaufort, SC, 211 Scott Street, (843) 524-1114. You cannot directly invest in an index. Wells Fargo Advisors did not assist in the preparation of this article, and its accuracy and completeness are not guaranteed.Relative Strength is a measure of price trends that indicates how a stock is performing relative to other stocks in its industry. The opinions expressed in this report are those of Dorsey Wright and are not necessarily those of Wells Fargo Advisors or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.  Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE. Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company. CAR 0415-01622.

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