A Good Day in the US Market
Most people looking at the headlines for today would conclude it was a great day to be in the market with the S&P500 up 1.35%.
That's a good conclusion, as long as you measure gains in US$. But, the greenback didn't have such a great day. How would some foreign investors holding the S&P500 have done today?
Measure that nice S&P500 move in euros and the big gain evaporates to nearly nothing.
A Swiss or Norwegian investor did a bit better, but only clocked about a tenth of a percent.
Our friends in Great Britain, Mexico, Chile and Canada held on to a little under one percent.
Value your portfolio in Swedish Krona or Australian dollars? Sorry, those nice gains we saw in the US are a loss for you.
I'm no expert on currency trading, but I do know the weakening dollar will have impacts on our finances. Stuff we buy from outside the US will get more expensive. Treasury rates will head up as investors demand higher yields to compensate for the risk of getting repaid in less valuable dollars.
On the flip side, companies that generate a lot of revenue outside the US will pick up a tailwind from the currency exchange - particularly if their costs are in US$.
For the Foolish collective - Are you doing anything to hedge against or profit from currencies? If so, please share.
Disclosure: Long Aussie$ via the FXA etf.