However, I quickly realized that it should matter to me and it DOES affect me even if I didn't invest in dollars, buy foreign goods from foreign countries or travel outside of the U.S. Why?
When the dollar goes down, we lose purchasing power and our costs of living go up. Inflation rises as the dollar falls...and that can affect anyone greatly! It's one reason why I invest in commodity-stocks because they help offset those rising costs.
You see, when the dollar goes down...it's like you're earning less money per year even if you're earning the same amount as last year (because your costs have gone up). I bring this up now because the dollar has been falling all year, and it could be about to get worse. Let's take a look.
In the chart of the U.S. Dollar Index (which tracks the dollar vs. a basket of six other major currencies), we see that the dollar has continued to break down, blowing through its green uptrend line, it's blue 50-week moving average and now it's threatening to fall below its 200-week moving average.
Additionally, the RSI and MACD continue to lose momentum which is another bearish sign.
Also, another thing to remember is that the dollar's decline was blamed for sparking the stock market crash of 1987. So as stocks dip and foreigners leave our market and the dollar continues to decline, it could ag on another stock market correction once again.
It's another reason why I've encouraged you to hold large cash positions instead of being in the broader stock market and to be in value stocks and defensive assets, like my first portfolio pick.
Those of you who subscribed to my former newsletters hold value stocks, many of which are commodity-stocks that should do well in an environment of rising inflation and a falling dollar.