Monday, January 15th

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Hello Stock Traders,

The Dow Jones Industrial Average, that mighty bastion of American capitalism, appears poised for a potential skyward launch, reaching dizzying heights of 50,000, according to some bold predictions. Fueling this optimistic forecast? Not a surge in tech innovation or booming IPOs, but a curious, and perhaps counterintuitive, factor: a weaker US dollar.

This intriguing proposition comes from technical analyst JC Parets, founder of All Star Charts. In a recent podcast, Parets declared, with an almost messianic zeal, “It’s the only thing that actually matters.” He contends that a downward slide in the greenback is the missing piece to unlocking further astronomical gains for equities.

Why such confidence? Parets paints a picture of a symbiotic relationship between currency and stocks. A falling dollar acts like a potent performance enhancer for S&P 500 companies, boosting their bottom line through a magical trick called currency translation. Think of it as foreign profits getting a welcome massage, their value inflating like a soufflé in a hot oven.

Bank of America strategist Savita Subramanian chimes in, quantifying this magic: “Every 10% drop in the dollar translates into a 3% profit bump for S&P 500 earnings.” And with economists at the bank predicting a 3% depreciation for the dollar in 2024, the stage is seemingly set for corporate profits to dance a celebratory jig, with stocks joining in the merriment.

But Parets doesn’t rely solely on economic handstands. He’s a chart whisperer, interpreting the cryptic language of technical indicators. His radar is currently locked on the US dollar index, that enigmatic gauge of the dollar’s muscle against its currency rivals.

After its recent dip to near-18-month lows in December, Parets sees a clear trajectory: a breakdown to the 2020 lows of around 90, paving the way for a stock market fiesta. Just look at history, he urges, pointing to previous instances where dollar downturns coincided with stock market upticks. “This chart,” he proclaims, brandishing it like a sacred scroll, “is the only thing that actually matters.”

Now, let’s not mistake this for unadulterated euphoria. Skeptics abound, and rightfully so. The market, as every seasoned investor knows, is a fickle beast, prone to unpredictable gallops and sudden nosedives.

Fairlead Strategies’ founder Katie Stockton, another technical chart guru, acknowledges the dollar’s recent upward blip but remains bearish in the long run. She predicts a support range for the dollar between 99 and 100.8, and a decisive break below that could set the stage for Parets’ bullish prophecy to unfurl.

So, where does this leave us? Should we clear our schedules, dust off our celebratory confetti cannons, and book roundtrip tickets to Dow Jones Valhalla? Not quite. While the prospect of a 50,000 Dow is undeniably alluring, a healthy dose of cautious optimism is prudent.

The market, after all, is a labyrinth, and sometimes even the most seasoned cartographers get lost. But, one thing’s for sure: the US dollar’s next move could be the key to unlocking a treasure trove of gains, or sending the market on a rollercoaster ride with an uncertain ending. So, buckle up, metaphorically speaking, and keep your eyes peeled on that currency chart. It might just tell the story of the next chapter in Wall Street’s never-ending saga.

Remember, this is just one perspective on a complex issue. Always conduct your own research and consult with financial professionals before making any investment decisions.

–James

Up next: As billionaires like Bezos and Musk saw their wealth balloon by record amounts during the pandemic, the stark reality of a widening wealth gap and its corrosive impact on our societies demands an urgent call for action. 

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The past three years haven’t just been an era of lockdowns and sourdough starters; they’ve been a period of unprecedented wealth accumulation for the ultra-rich, further widening the chasm between the haves and have-nots.

A recent report by Oxfam paints a sobering picture of this inequality, revealing that during the pandemic, the five richest people in the world saw their net worth balloon by a staggering $869 billion – an obscene figure that translates to $14 million added to their coffers every hour.

While the likes of Jeff Bezos and Elon Musk celebrated their ballooning empires, fueled by booming online sales and skyrocketing tech stocks, millions of ordinary people grappled with job losses, stagnant wages, and a rising cost of living.

This stark contrast raises a fundamental question: is this obscene wealth concentration a natural product of market forces, or are there systemic flaws that deserve scrutiny and potential rectification?

The report points to several factors contributing to this extreme wealth accumulation. One culprit is the pandemic itself, which disproportionately benefited industries like tech and e-commerce, where the super-rich hold commanding stakes. Moreover, government stimulus measures, intended to cushion the economic blow, often ended up padding the pockets of already wealthy shareholders and corporations.

Beyond the immediate pandemic context, the report highlights a longer-term trend of rising CEO compensation and corporate monopolies, further contributing to wealth concentration. While worker wages stagnated for decades, CEO pay ballooned by over 1,200% between 1978 and 2022, creating a grotesque spectacle of executive enrichment amidst widespread economic hardship.

The consequences of this inequality are far-reaching and deeply troubling. As Oxfam rightly points out, it’s not just about a handful of individuals amassing exorbitant wealth; it’s about the corrosive impact it has on democracy, eroding social cohesion, and undermining opportunities for social mobility.

When a few individuals possess a level of wealth exceeding the GDP of entire nations, it raises serious questions about power dynamics and the ability of ordinary citizens to have their voices heard.

Solutions to this complex issue are multifaceted and require a nuanced approach. While some advocate for radical measures like wealth taxes, others propose regulations aimed at curbing corporate monopolies and ensuring fairer wage distribution. Regardless of the specific policies, one thing is clear: inaction is not an option. Allowing the wealth gap to fester unchecked will only exacerbate social tensions and threaten the very fabric of our societies.

This isn’t simply a matter of envy or resentment towards the ultra-rich; it’s about building a fairer, more equitable society where everyone has a chance to thrive. Addressing wealth inequality requires a collective effort, a willingness to reexamine existing economic structures and implement policies that prioritize shared prosperity over unbridled accumulation at the top.

While the challenges are daunting, we can’t afford to succumb to cynicism. History is replete with examples of societies successfully combating inequality through progressive taxation, social safety nets, and investments in education and healthcare.

The path towards a more equitable future may be long and winding, but it’s a journey worth taking. We owe it to ourselves and future generations to build a world where obscene wealth isn’t celebrated, but rather seen as a symptom of a system in dire need of repair.

The time for action is now. Let’s not allow the pandemic profiteers to become the sole beneficiaries of this extraordinary period. Let’s bridge the great divide and create a world where prosperity is shared, not hoarded. The future we choose will be shaped by the actions we take today.

Disclaimer:

Trading foreign exchange, stocks, options, or futures on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade, you should carefully consider your objectives, financial situation, needs and level of experience.

This newsletter provides general information that does not take into account your objectives, financial situation or needs. The content of this newsletter or our website must not be construed as personal advice. COE Media is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation.

The possibility exists that you could sustain a loss in excess of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. You should seek advice from an independent financial advisor.

Any past performance presented is not necessarily indicative of future success.

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