Rising Global Liquidity: Deflationary Dollar & Rallying Equities

9月28日

While it's uncommon for the dollar (DXY) and equities (S&P 500) to rise simultaneously, historical instances illustrate that it can occur under specific economic conditions.

I think those conditions may be upon us!

Historical Examples:

1995:
DXY Movement: Strengthening
S&P 500 Movement: Rising
Context: Strong economic growth and corporate earnings propelled equities higher.

2001-2002:
DXY Movement: Strengthening
S&P 500 Movement: Rising
Context: Economic recovery following the tech bubble burst.

2011:
DXY Movement: Strengthening
S&P 500 Movement: Rising
Context: Safe-haven buying of the dollar amid European debt concerns, while stocks benefited from robust corporate earnings.

March 2020:
DXY Movement: Strengthening
S&P 500 Movement: Rising (post-COVID)
Context: Initial flight to safety due to uncertainty, followed by stimulus-driven stock market recovery.

Mid-Late 2025 - Crescendo:
DXY Movement: Potential strength driven by deflationary AI Pressure cheapening productivity & labor cycles
S&P 500 Movement: Rising markets as all assets rally as a result of increased liquidity from stimulus
Context: it takes a few months for stimulus to reach assets- the next few *years* might have stimulus coming. Inflate the debt away while the dollar rises?

These historical instances suggest that a strengthening dollar *can* coexist with rising equities, particularly in environments characterized by global liquidity increases.

Given the chart, we have a convergence of two long term trend lines, first in the ascending channel on the ‘short term’ (1yr candles, in top photo ascending channel).

Then for the longer term ‘cup’ trend going back decades (ref bottom RSI momentum dating back to 1980s), *that* might show that we truly are on the cusp of incredible amounts of stimulus.

What do you think? Is it possible that the dollar goes higher while we receive trillions in stimulus? Is this the fuel for the ‘everything rally’?