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Could Stronger Dollar Trigger Market Rally?


We know what you’re thinking, the market needs a weak dollar to go higher. Well maybe not.

The wisdom in the market right now is that a weak dollar provides a tailwind for stocks.

At the risk of sounding like a broken record that’s largely because it drives commodity prices higher. Then, energy shares and natural resource names follow along.

Street Fight

It also benefits multi-nationals as they repatriate profits back into dollars. (They get more dollars for every euro, etc.)

Well, maybe it’s time for the wind to change direction – or to re-think that wisdom. Gary Kaminsky, the former Neuberger Berman managing director says “a stronger dollar does not equal a weaker market.”

And he’s far from alone. In fact, Bespoke research shows that equities do better when the dollar rallies. During the last 5 dollar bull markets the average return on the S&P was 59%.

That’s largely because the stronger dollar signals strength in the US economy. And it generates new sectors of leadership. Typically, the industrials, airlines and retailers all benefit as the dollar gains. And it keeps a lid on prices at the pump – arguably the most important influence of all.

If we are heading into a period of dollar strength, what must you know?

I’d reposition my portfolio with some of the consumer names that benefit such as Proctor and Gamble as well as the airlines that benefit as oil comes down. And I’d consider the UUP, the ETF that tracks the dollar. says Kaminsky.

Especially, if you own energy and commodity related stocks I’d definitely put a hedge on and you can do it with the UUP, Kaminsky adds.

What do you think? We want to know!

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Trader disclosure: On October 28th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (BX), (EEM), (INTC), (MSFT), (FXI); Najarian Owns (BX) Call Spread; Najarian Owns (EXPE) Calls

Najarian Owns (GE) Calls; Najarian Owns (LAZ) & (LAZ) Puts; Najarian Owns (MYL); Najarian Owns (RIMM) Call Spread; Najarian Owns (YHOO) & (YHOO) Puts; Terranova Owns (IBM), (QCOM), (GS); Finerman Owns (PDE), (TGT), (WMT), (BAC); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Owns (PDE), (PBR), (RIG); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (UNG);

Deborah Weinswig
Citi Owns (TGT)
Citi Has Received Compensation for Investment Banking from (TGT)
(TGT) Has Been A Client Of Citi in the Past 12 Months
Citi Has Acted As Manager Of An Offering of Securities of (WMT)
Citi Has Received Compensation for Investment Banking from (WMT)
(WMT) Has Been A Client Of Citi in the Past 12 Months
Citi Is Market Maker in Shares of (WMT)

Rich Repetto
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Sandler O'Neill Expects To Receive Compenation from (NYX)

For Brian Kelly
Kelly Owns (QCOM)
Kelly Owns (ORCL) with wires