ChristopherCarrollSmith

10-yr market cycle for FX, commodities, value, & global stocks?

Long
AMEX:USCI   United States Commodity Index Fund ETV
The US dollar tends to trade in a ten-year cycle relative to global currencies. It outperforms for ten years, then underperforms for ten years, then outperforms, and so on. This year we seem to have ended a cycle of outperformance when the US dollar broke its ten-year trend line (orange line on the chart).

The dollar is inversely correlated to all sorts of other things, including alternative currencies (including Bitcoin ), commodities (including metals), global equities (developed, emerging, and frontier markets), and perhaps the value/growth ratio (mostly because value companies like energy majors and miners benefit from strong commodities prices). That means that the ten-year dollar cycle also tends to create ten-year cycles in these other markets.

The downward dollar breakout has already led to an upward breakout in the ratios of global and emerging markets equities to US equities (purple and green lines on the chart). A recent survey of investment managers showed that they believe emerging markets will be the best performer over the next ten years. Commodities also rank highly in those investment manager surveys, and we are nearing a trend line break for commodities (red line on the chart). The value/growth ratio (black line on the chart) has been showing a little life as well, and it's possible that we will also head toward a trend line break in that ratio.
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Comments

Great chart.
+1 Reply
Nice and understandable charts, let’s bag the pips, don’t you think?
+1 Reply