Kensho Stats

Surging dollar could derail the Trump postelection rally, if history is any guide

Donald Trump prepares to autograph a cardboard with two dollars taped to it as he greets people during a campaign event at Hampshire Hills Athletic Club on February 2, 2016.
Joe Raedle | Getty Images
Donald Trump prepares to autograph a cardboard with two dollars taped to it as he greets people during a campaign event at Hampshire Hills Athletic Club on February 2, 2016.

The stocks that investors are crowding into the most during the rally following Donald Trump's upset election win are the same shares that have proven to be the most vulnerable to a strong dollar, history shows.

The postelection rally took a pause Wednesday as Wall Street pondered whether President-elect Donald Trump's growth-inducing policies would outweigh the effects of a surging greenback on companies' bottom lines.

"A stronger U.S. dollar is plausible if growth and inflation ensue, thereby limiting the earnings benefits" of Trump's plans for deregulation and lower taxes, wrote Tobias Levkovich, chief U.S. equity strategist at Citigroup, in a note to clients.

The U.S. Dollar Index, a benchmark of the greenback against a basket of foreign currencies, hit a 13-year high on Wednesday and is up a little more than 8 percent since its 2016 low in May.

Using hedge fund analytics tool Kensho, we sought to find what could happen if that rally continues. Here were the market's worst-performing sectors when the dollar index rose 10 percent in six months. This kind of dollar surge occurred six times in the last decade, according to Kensho.


As the table above shows, commodity-related, financial and industrial sectors were the worst performers during strong-dollar periods. In the last week, investors have tripped over themselves buying these stocks on Trump's proposals for deregulation and lower taxes.

On the flip side, the sectors that outperformed during periods of a surging dollar include health care, utilities and consumer staples, according to Kensho. Most of those stocks, except for drugmakers within the health care space, have been laggards during the Trump rally.


— CNBC's John Melloy contributed to this report.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.