Kensho Stats

Here's what happens to stocks when the dollar falls, in case President Trump is wondering

Donald Trump
Pete Marovich | Pool via Bloomberg | Getty Images
Donald Trump

President Donald Trump reportedly called retired Lt. Gen. Mike Flynn at 3 a.m. to inquire about whether a stronger dollar or weak one was best for the economy. Why he decided to call his national security advisor in the middle of the night about this is not certain, but it's clear that the greenback is on his mind.

CNBC PRO can clear things up for him a bit with the help of hedge fund analytics tool Kensho.

Here is the performance of the Dow, S&P 500, gold and bonds during the last three major dollar depreciation cycles when the U.S. dollar index fell at least 20 percent without a 20 percent increase at any point during the same time period.

And here is their performance during major dollar appreciation cycles, according to Kensho:

The answer for the president, on the surface, is pretty clear, according to history: he should want a weak dollar. And we suspect he eventually found someone with the right financial expertise to give him that answer.

But there's one big caveat: Trump can't make his want for a weak dollar that obvious because then the greenback could collapse. If the move in the dollar goes too far, too fast, it could spark a spike in inflation, raising costs mightily for the domestic producers he so cherishes, along with causing other financial market calamities.

You can see above that even during longer, drawn-out dollar depreciation cycles, gold surges and bonds underperform on inflation fears.

The real answer is that Trump should want currency stability, while secretly hoping for a little weakness. But we're not sure he can pull that off since subtlety is not exactly his strong point.

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