The U.S. Dollar is trash... if I had penned a different headline would you be reading this right now? Probably not. Folks have been foretelling the demise of the U.S. Dollar for years now. Mostly the perma-bear folks who want you to buy Gold. Instead the U.S. Dollar just hit 20 year highs.
Have to think this is bullish small caps. With all the banter around inflation these days, a stronger U.S. dollar benefits smaller companies with little sales exposure overseas. A stronger U.S. dollar expands the purchasing power of these companies as raw materials, components, and supplies are less expensive. At the worst this cancels out inflation, at best they can pad their profit margins.
This weekend I would expect headlines to be wrapped around the impending recession. The first read on Q1 GDP came in negative on Thursday. Pending any crazy revision, have to think Q2 will be negative as well. Not many talking about the benefits of a stronger U.S. Dollar and the impacts on all the small businesses in the U.S..Have to think small-caps will outperform on the coming weeks and months. Only question is if it will fall less then the S&P or gain more:
Happy Trading!
-JB