Growing consensus in the investment world is generally bad for the existing trend. For instance, the majority turns bearish on the US dollar, the more likely it will reverse direction and breakout to new highs against the consensus expectations. This pattern of reversals against consensus expectations repeats over time, because the majority embraces opinion more than it does the message of the market.
While the logic of a falling dollar is good for stocks appears sound, it’s flawed not only because stocks have risen significantly as the dollar rose in value, even until just recently, but also the fact that smart money, a group significantly more disciplined and skilled at anticipating future direction, continue to accumulate the decline. An unexpected reversal is only a matter of time and energy. The message of the dollar market, outside consensus driven headlines, is bullish energy is rising.
Headline: The Dollar Swoon Lifting U.S. Stocks Is Seen Continuing
A growing investor consensus that the weak dollar will keep weakening is rippling around the world, fueling rallies in everything from U.S. stocks to commodities.
The dollar has been suffering through one of its worst stretches in years, weighed down by scant inflation and doubts whether the Federal Reserve will raise rates anytime soon.