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The US dollar is on track for its worst year in modern history

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124 points harambae | 3 comments | 04 Jul 25 06:47 UTC | HN request time: 0.248s | source
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snovv_crash ◴[04 Jul 25 07:31 UTC] No.44462062[source]▶
From outside the US, all the 'stock market gains' have actually been zero or negative because of this. I wonder how long before inflation hits...
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patrickhogan1 ◴[04 Jul 25 07:45 UTC] No.44462156[source]▶
This is spot on and cuts both ways. Much of the Japanese market's recent "performance" in US media is actually just yen weakness against the dollar. Strip out currency effects and the story looks very different. Same with European markets "performance" - we're often seeing monetary policy divergence rather than genuine outperformance in foreign markets.

Always check both local currency and USD returns when evaluating international markets.

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1. argsnd ◴[04 Jul 25 07:59 UTC] No.44462251[source]▶
European markets are doing fine in Euro terms aren’t they?
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2. hx8 ◴[04 Jul 25 08:11 UTC] No.44462328[source]▶
You should evaluate foreign market results based on your domestic currency. Here is the US centric example.

1. You exchange Dollars for Euros

2. You buy a stock in Euros

3. You hold the stock in Euros for a period of time

4. You sell the stock in Euros

5. You exchange your Euros for Dollars.

The difference in the exchange rate in step 1 and 5 can have a very large impact on your total return, often times a larger impact than step 3.

3. patrickhogan1 ◴[04 Jul 25 08:33 UTC] No.44462447[source]▶
MSCI Europe is up about 8-9% in euros so far this year—roughly the same as the S&P 500 in dollars.

But the euro itself has climbed ~10% YTD vs the dollar (≈ $1.02 → $1.12-1.18). So you get an ~18% gain if you invest in MSCI Europe in dollars.

Europe hasn't "beaten" US stocks because its companies suddenly out-executed; most of the gap is the stronger euro.

Not that it matters who’s "winning." My gripe is with US headlines that shout "Japan stocks are on fire" or "Europe stocks are on fire," when what’s really happening is that global markets are rising together and currency swings make one region look better than another.