The U.S.dollar has been weaker against the euro for 20 years. This is what happened next.


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One bold bet is to believe that the dollar, particularly against the euro, will become weaker. Another bold prediction is that U.S. stocks may outperform international equities.

Dollar weakness would be an inversion of a trend which dates back many years. The U.S. Dollar Index
which reflects the dollar’s strength vis-a-vis a basket of foreign currencies, is 50% higher than where it stood a decade ago — and has risen more than 20% since the beginning of 2021. The dollar’s strength has been especially evident this year against the euro

: Earlier this week the euro traded below US$1, in fact — 20% cheaper relative to the dollar than where it stood at the beginning of 2021.

Two decades ago, in late 2002, the dollar was at parity with its euro counterpart. The contrarian narrative about what happened afterwards is also true. The dollar has suffered a significant decline against the euro over the years. It took more than US$1.50 in 2008 to buy one euro, as opposed to US$1.00 in 2002. The U.S. Dollar Index declined by 40% during the same time period.

Not surprisingly, given that the dollar-denominated returns of non-U.S. stocks rise when the U.S. dollar weakens, the S&P 500

Over the five-year period, it seriously lag the global stock markets. It was almost five percentage point behind the FTSE World Ex-US Index and almost three percent behind the FTSE Europe Index over the same period.

The five-year period from 2008 to 2008 is just one data point. To provide a more complete picture, I measured the relationship between the euro (dollar) and the euro back to the late 1990s when euro trading began on foreign exchange market. I found that the correlation is inverse: 12-month periods in which the dollar was stronger than the euro were more often than not followed by 12-month periods in which the dollar was weaker — and vice versa.

The correlation was only of moderate statistical significance so it would not be wise to place all your bets on it. You can only conclude that it is unlikely that the trend over the past 12 month will continue. A somewhat less strong implication is that the past 12 months’ trend may soon reverse itself.

There is a strong correlation between contemporaneous changes in the dollar-euro exchange rate, on the one hand, and the performance of the S&P 500 relative to that of the dollar-denominated return European stocks, on the other. The chart above shows the difference: In those months in which the dollar gained ground relative to the euro, the S&P 500 beat the Vanguard European Stock Index Fund

An annualized 16.3% In those months in which the dollar lost to the euro, in contrast, the S&P 500 lagged the Vanguard fund by 9.5% annualized.

U.S. versus European equities

Even if the euro isn’t stronger than the dollar anytime soon, contrarians would still bet that U.S. stocks will lag European equities. That’s because European equities trade at much lower valuations than their U.S. counterparts, so even if the dollar-euro exchange rate stays constant they offer better value. The return these stocks provide for dollar-denominated investors is even more if the euro strengthens against it.

Comparison of European stock prices relative to U.S. stocks gives one indication of their undervalued. This is the basis of this. Barclays IndicesAccording to your perspective, European stocks in general are 31% lower than the U.S. Equity Market (or 31% lower overvalued).

An index fund is the best way to get diversified exposure to European equities. Vanguard FTSE Europe ETF has the most assets under management.
With a 0.08% expense ratio (or $8 per $10,000 invested).

Below are stocks recommended by top newsletters to be purchased by my auditing firm.



AerCap Holdings N.V. (AER).


Allianz SE Unsponsored ADR ALIZY


Amcor PLC (AMCR).

United Kingdom

AXA SA Sponsored ADR


BASF SE Sponsored ADR


BP p.l.c. Sponsored ADR BP

United Kingdom

Cimpress Plc (CMPR).


Credit Suisse Group AG Sponsored ADR. (CS)


Eaton Corp. Plc. (ETN).


Exscientia Plc Sponsored ADR(EXAI).

United Kingdom

Holcim Ltd Unsponsored ADR(HCMLY).


Janus Henderson Group PLC – JHG

United Kingdom

Koninklijke Philips N.V. Sponsored ADRs (PHG).


Logitech International S.A.


Medtronic Plc (MDT).


Nokia Oyj Sponsored ADR


NXP Semiconductors NV NV (NXPI).


Pershing Square Holdings Ltd. Public Class USD Accum.Shs. (PSHZF).

United Kingdom

Rio Tinto plc Sponsored ADR – RIO

United Kingdom

Sage Group plc Unsponsored ADR(SGPYY).

United Kingdom

Sanofi sponsored ADR (SNY).


Seagate Technology Holdings PLC (STX)


Shell PLC Sponsored ADR

United Kingdom

Siemens AG Sponsored ADR


TotalEnergies SE Sponsored DR (TTE).


Vodafone Group Plc Sponsored ADRs (VOD).

United Kingdom

Volkswagen AG Unsponsored ADR (VWAGY)


MarketWatch is regularly updated by Mark Hulbert. Hulbert Ratings monitors investment newsletters paying a flat fee to have their audits done. Contact him at

More: Bank of America slashes S&P 500 target to ‘lowest on the Street’ after recession forecast

Also see: Here’s the sector most at risk from Russia permanently shutting off gas to Germany — and it’s taking a tumble


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