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Market Correlations: Trade-Weighted Dollar

Yardeni Research, Inc.

September 27, 2021

Dr. Edward Yardeni 516-972-7683 [email protected]

Joe Abbott 732-497-5306 [email protected]

Mali Quintana 480-664-1333 [email protected]

Please visit our sites at www.yardeni.com blog.yardeni.com

thinking outside the box Table Of Contents TableTable OfOf ContentsContents

TWD & Commodities 1 TWD & EM MSCI 2 TWD & Inflation 3 TWD & Profits 4 TWD & Expected Inflation 5 Gold, Crude Oil, & Trade-Weighted Dollar 6 Misc. 7

September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & Commodities Figure 1. 70 700 INDUSTRIALS COMMODITY 75 PRICE INDEX & TRADE WEIGHTED DOLLAR 650 80 9/24 600 85 CRB Raw Industrials 90 Spot Price Index* 550 (1967=100)

95 500 JP Morgan Nominal 100 Broad Effective Exchange Rate** 450 105 (inverted scale)

110 400

115 350

120 9/27 300 125 250 130 yardeni.com 135 200 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

* Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow. ** , , Brazil, Bulgaria, , Chile, China, Colombia, Croatia, Czech Republic, , , Egypt, , Germany, , Hungary, , India, Indonesia, Israel, Italy, Korea, Kuwait, , Mexico, Morocco, , Nigeria, Norway, Pakistan, , , , Poland, Romania, Russia Saudi Arabia, , South Africa, , Sweden, Switzerland, , Thailand, Turkey, , Ukraine, , , Vietnam, and . Source: Commodity Research Bureau and JP Morgan. Figure 2. 85 160 BRENT CRUDE OIL PRICE & TRADE-WEIGHTED DOLLAR 150 90 140 95 130 120 100 110 105 100 90 110 80 115 70 60 120 9/27 50 125 Brent Crude Oil Futures Price* (dollars per barrel) 40 130 30 JP Morgan Nominal 20 135 Broad Effective Exchange Rate** (inverted scale) 10 yardeni.com 140 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

* Nearby futures price. ** Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Haver Analytics.

Page 1 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & EM MSCI Figure 3. 85 1500 EMERGING MARKETS MSCI STOCK PRICE INDEX & 90 TRADE-WEIGHTED DOLLAR 9/24 95

100 1000 105

110

115 Emerging Markets 120 9/27 MSCI Stock Price Index 500 (in dollars) 125 JP Morgan Nominal 130 Broad Effective Exchange Rate* (inverted scale) 135

yardeni.com 140 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

* Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Morgan Stanley Capital International. Figure 4. 85 100000 EMERGING MARKETS MSCI STOCK PRICE INDEX & 90 TRADE-WEIGHTED DOLLAR

95 80000

100 9/24

105 60000 110

115 40000 120 Emerging Markets 9/27 MSCI Stock Price Index (in local ) 125

JP Morgan Nominal 20000 130 Broad Effective Exchange Rate* (inverted scale) 135

yardeni.com 140 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

* Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Morgan Stanley Capital International.

Page 2 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & Inflation Figure 5. 4.0 70 INFLATION & TRADE-WEIGHTED DOLLAR Jul 3.5 80 JP Morgan Nominal Broad Effective Exchange Rate* 3.0 (inverted scale) 90 PCED: Total Ex 2.5 Food & Energy (yearly percent change) 100

2.0

110 1.5

9/27 120 1.0

130 .5

yardeni.com .0 140 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

* Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: US Department of Commerce, Bureau of Economic Analysis and JP Morgan. Figure 6. 75 15 US IMPORT PRICES & TRADE-WEIGHTED DOLLAR 80

85 JP Morgan Nominal Broad Effective Exchange Rate* 10 90 (inverted scale) (120.4)

95 Import Price Index: Nonpetroleum Imports Aug 100 (yearly percent change) (5.9) 5 105

110

115 0

120 9/27

125 -5 130

135 yardeni.com 140 -10 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

* Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Bureau of Labor Statistics and JP Morgan.

Page 3 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & Profits Figure 7. Q2 -16 20 S&P 500 REVENUES PER SHARE & US TRADE-WEIGHTED DOLLAR -14 (yearly percent change) -12 15 -10 -8 10 -6 -4 5 9/24 -2 0 0 2 4 -5 6 8 -10 10 12 -15 JP Morgan Nominal 14 Broad Effective 16 Exchange Rate* S&P 500 Revenues -20 (inverted scale) (-3.0) (using dollars per share) (21.7) 18 yardeni.com 20 -25 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

* Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Standard & Poor’s. Figure 8. -30 45 S&P 500 FORWARD EARNINGS & US TRADE-WEIGHTED DOLLAR (yearly percent change) 9/16

-20 30

-10 15

9/24 0 0

10 -15

JP Morgan Nominal Broad Effective Exchange Rate* 20 (inverted scale) (-3.0) -30

S&P 500 Forward Earnings** (36.9) yardeni.com 30 -45 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

* Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. ** Time-weighted average of consensus estimates for current and next year. Source: I/B/E/S data by Refinitiv and JP Morgan. Page 4 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & Expected Inflation Figure 9. 80 3.4 TRADE-WEIGHTED DOLLAR & EXPECTED INFLATION 3.2 3.0 90 2.8 2.6 2.4 9/24 100 2.2 2.0 1.8 110 1.6 1.4 JP Morgan Nominal 1.2 120 Broad Effective 1.0 Exchange Rate** 9/27 (inverted scale) .8 .6 130 Expected Inflation .4 in 10-Year TIPS* .2 .0 yardeni.com 140 -.2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

* Yield spread between 10-year US Treasury bond and comparable TIPS. ** Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Commodity Research Bureau and JP Morgan.

Page 5 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com Gold, Crude Oil, & Trade-Weighted Dollar Figure 10. 150 2500 GOLD PRICE & WEST TEXAS INTERMEDIATE CRUDE OIL PRICE

Gold Price* (dollars per ounce) 2000

9/24 100 West Texas Intermediate Crude Oil Price (dollars per barrel) 1500

1000

50

500

yardeni.com 0 0 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

* Cash price. London gold bullion, PM Fix. Source: Haver Analytics.

Figure 11. 2500 160 GOLD PRICE & FED’S TRADE-WEIGHTED DOLLAR INDEX

2000 Gold Price* 140 (dollars per ounce)

Fed’s Major Trade-Weighted Dollar Index** 1500 (March 1973=100) 120

1000 100

12/31

500 80

yardeni.com 0 60 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

* Cash price. London gold bullion, PM Fix. ** Index is the weighted average of the foreign exchange rates of the US dollar against the Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden. The Euro Area includes Germany, France, Italy, , Belgium/Luxembourg, Ireland, Spain, Austria, Finland, Portugal, & Greece. Source: Haver Analytics.

Page 6 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com Misc. Figure 12. 6 60 US 10-YEAR GOVERNMENT BOND YIELD & TRADE-WEIGHTED DOLLAR

JP Morgan Nominal 70 5 Broad Effective Exchange Rate* (inverted scale) 80 10-Year Government 4 Bond Yield 90

3 100

110 2

9/24 120

1 130

yardeni.com 0 140 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

* Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Board of Governors of the Federal Reserve System and JP Morgan.

Page 7 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com Copyright (c) Yardeni Research, Inc. 2021. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports and podcasts posted on www.yardeni.com, blog.yardeni.comhttp://blog.yardeni.com, and YRI’s Apps are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments.

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