The greenback is exploding…
The U.S. dollar is appreciating against the world’s other major currencies at the fastest rate in history. This is the first time the U.S. dollar has ever appreciated at a rate above 20% over about six months…
The chart below shows the dollar’s relative moves since it lost its gold backing.
According to Bank of America, the dollar is on track to post its highest quarterly gain since 1992. That’s its second-highest gain ever. Gains of similar magnitudes have corresponded to extreme financial or geopolitical shocks.
For example, the current move is stronger than when the Federal Reserve increased interest rates to 19%… higher than during the first Gulf War… even higher than the 2008-2009 financial crisis that caused the “Great Recession.”
(Click on the chart below for a larger version.)
To learn how the dollar’s extreme setup will affect the markets and your portfolio, read our next item by former hedge fund manager and Mega Trends Investing Editor Teeka Tiwari…
The Fed is about to create a list of huge winners and enormous losers. Here’s how to make the winners’ column.
From Teeka Tiwari, editor, Mega Trends Investing:
In my first Mega Trends special report, How to Survive and Prosper in the Coming Income Crisis, I told you why interest rates are certain to rise in the near future, and how the fallout from those rising rates could cripple certain investments.
I call this “Income Extermination.”
(To help you track Income Extermination, I monitor interest rates each month and give you commentary on where we are and what to do.)
Many folks erroneously believe that higher interest rates must mean lower stock prices. That’s part of the reason why the Dow is down almost 300 points as of this writing.
In a normal interest rate environment, pessimists would be correct in being fearful. The thing is… we aren’t in a normal interest rate environment.
The 50-year average interest rate for the 10-year Treasury is 6%. Right now, the 10-year is at 2.1%. We haven’t been this far from normal rates since 1949.
You can see from the chart below that the Federal Funds Rate (the rate that the Fed manipulates to manage interest rates) went from below 2% in 1949 to 6% in 1966.
Rates tripled during that period, yet the average annual rate of return for the S&P 500 was 16%. It wasn’t until rates went above 6% that the stock market started to react negatively.
So, rest assured: Rates are going to go up, but because they are going up from such a low level, they will not derail the overall stock market. Certain rate-sensitive industries and sectors (things like utilities, real estate investment trusts (REITs), many bond ETFs, etc.) will get hammered… but the overall trajectory of the S&P 500 is higher.
Bonds, on the other hand, will get killed as rates rise. I explained the details behind this move in the March 11 Palm Beach Daily. I urge you to heed my warning to avoid any bonds with a duration greater than seven years.
I show you exactly which stocks and sectors to avoid as Income Extermination sends interest rates soaring in the special report I mentioned above. Mega Trends Investing subscribers can click here to review the report.