Market Extra: The U.S. dollar is wreaking havoc: What that means for the stock market and investors

by | Oct 21, 2022 | Stock Market

Amid all of 2022’s wild volatility, there’s one thing that investors can still count on: the strong U.S. dollar.The ICE U.S. Dollar Index
which measures the U.S. currency’s strength against a basket of six other currencies, is up 20.6% in the past 12 months, with the greenback thrashing major counterparts like the yen
and pound
in the process, while wreaking havoc all over the world.

This comes at a time when all three major stock indexes


are nursing double-digit percentage losses this year, global government bonds have been stuck in one of their greatest bear markets ever, and even gold has had a choppy year.Read: A rampaging U.S. dollar just booked its strongest quarter in at least 7 years as investors search for safetyTo understand why the dollar is outperforming other assets by so much, even as projections point to 100% certainty of a U.S. recession in the next 12 months, it’s useful to take a step back. First, currencies always trade relative to what’s going on everywhere else in the world and, right now, rapidly rising U.S. interest rates compared with other countries are the major reason the dollar is appreciating. In technical parlance, that’s known as the interest-rate differential, or difference in monetary policy among central banks.The Federal Reserve is standing resolute in its efforts to bring down inflation with rate increases, …

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