Disturbing: SPY / GLD
Want to be disturbed? In case you weren’t sure if the last 5 years of positive market action is really just a function of U.S. Dollar weakness (’08 crash as an irrelevent aside for our purposes)… um… it is.
The S&P has rallied for the last 3 years. But really, since 2006, strength in the U.S. equity markets has largely been a function of dollar weakness. Below is a chart of the S&P 500 (SPY) measured in gold (GLD), which allows us to take into account appreciation/depreciation of U.S. Dollars. I prefer to use gold as my Dollar proxy, since UUP and Dollar indexes are measured against other Fiat currencies and wouldn’t take into account any universal strengthening/weakening of Fiat currencies as a whole. Below is a 20 year chart of the S&P as measured in gold.
Then the more familiar S&P chart over the last 20 years, as measured in U.S. Dollars:
Quite a different picture, eh?
Next up – SPY vs. Fed Balance Sheet. I’m pretty the correlation is striking.