Over the last year, the U.S. Dollar has been a global wrecking ball. Since 2007, there’s over $10T of new dollar denominated debt on earth. As the Federal Reserve has kept interest rates near zero for nearly eight years, global debt excesses have piled up, especially in emerging markets and commodities (oil) leverage.
Surges in the U.S. dollar now come with more global systemic risk than ever before.
If you’re trading stocks and not keeping a sharp eye on the dollar as well as policy hints coming out of the Federal Reserve, you’re sitting at the table at a disadvantage.
This week, U.S. Treasuries forged their biggest weekly decline since November.
Fedspeak (FOMC governors on the speaking tour) and minutes from the April meeting, brought back bets that policy makers will raise rates as soon as next month. The dollar soared and brought systemic risk back on the front page.
U.S. Trading Partner Total Trade
South Korea $116B
United Kingdom $115B
One of our key 21 Lehman systemic risk indicators has been focused on China’s currency.
At the Bear Traps Report, our passion is focused on helping our subscribers understand leading risk indictors. There are always warning signs which take place just BEFORE large, elevator shaft like drops in the stock market. As you can see below, China’s “currency devaluation moves” have occurred just before the last two 13-16% drops in the S&P 500.
In recent days, the Chinese yuan is on the dangerous devaluation train yet again (see above), be warned.