LIVE MARKETS-Dollar down, stocks down, what gives?

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DOLLAR DOWN, STOCKS DOWN, WHAT GIVES?

Over the past three months, the S&P 500 index .SPX and the U.S. dollar Index .DXY have suffered notable declines, fueling a familiar round of narratives questioning the state of U.S. exceptionalism and speculating about the dollar's reserve currency status.

Although the headlines tilt toward the dramatic, as Dean Christian, senior research analyst at SentimenTrader, sees it, we are likely witnessing a capital repatriation flow, which he says is not uncommon during global equity market stress when investors seek the safety of their home country, and this doesn't equate with the notion of the dollar's demise.

This time, the trigger is simply the tariff tantrum, as rising trade tensions have stoked global market uncertainty.

With this, the S&P 500 and the dollar index have been tracking together to the downside over the last three months or so:

According to Christian, given dollar swings often impact stock prices, especially those of large-cap multinationals, and after it and the S&P 500 dropped as they have over the last three months, on a six-month forward basis, the dollar showed no consistent pattern, acting much like a coin flip. However, a year later, it was higher in 75% of the cases.

As for the S&P 500 over the six-month forward time frame, Christian says it showed modest strength during the first three months, but momentum stalled, with the index advancing in just half of the instances between months four and six.

"In six of the eight historical parallels, the world's most benchmarked index went on to post a lower low. Only 1978 and 1998 coincided with a bottom," writes Christian in a note.

Therefore, Christian believes a cautious stance, while awaiting a more favorable entry point for stocks "appears prudent."

(Terence Gabriel)

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FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:

MARKET TIP: SIDESTEP STOCKS TIED TO CHINA (FOR NOW) - CLICK HERE

TWO-FER TUESDAY: IMPORT COSTS AND EMPIRE STATE - CLICK HERE

GATHERING SOME STEAM - CLICK HERE

S&P 500 INDEX: CAN IT BUILD BACK BETTER? - CLICK HERE

RECOVERING FROM PEAK TARIFF PANIC - CLICK HERE

HUMPTY DUMPTY HAS FALLEN, BUT HARD DATA DOESN'T YET SHOW IT - CLICK HERE

EUROPE INC EARNINGS: "RISKS TO THE DOWNSIDE" - CLICK HERE

BARCLAYS RECOMMENDS LONG 5-YEAR US TREASURIES - CLICK HERE

BOUNCING BACK - CLICK HERE

EUROPE BEFORE THE BELL: LVMH EARNINGS WREST FOCUS FROM TARIFFS - CLICK HERE

MORNING BID: TAXES AND TARIFFS ON THE MIND AS RELIEF RALLY LIMPS ALONG - CLICK HERE