How big could this US Dollar decline story get? Pretty dang huge! Right now it is risk. Unrealized risk. Like unrealized return, the dollar is slipping but the downward move has not truly “cashed in” yet. I keep seeing signs it could. Meanwhile, I like the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) here, advises Robert Isbitts, editor of ETFYourself.
How to profit off of the dollar move, beyond the little option trading stuff I do on the side, is not yet entirely clear. If we’re looking for a reason that September and October could be like some past fall nightmares, though, I think the culprit may be the greenback.
(Editor’s Note: Robert Isbitts is speaking at the 2024 MoneyShow Orlando, which runs Oct. 17-19. Click HERE to register)
Yet with the stock market potentially set up to be “risk off” if the dollar goes from weak to worse, the biggest equity ETF position I currently hold in the CORE portfolio is the SPHD...and it is knocking on the door of a new high.
I first bought it back in March. It survived the August flash-crash thing, continuing higher throughout most of it. It is up 16% since that purchase, while the S&P 500 is up less than 10%. That is not a sign of a sustained “broadening” of the stock market beyond mega-cap tech. But it could be the start of one.
Meanwhile, we talk so much here about the 2-10 US Treasury spread, the most reliable recession indicator of the past 75 years. But recession, reschmession! We just want to make money and not lose it.
So, it is worth noting that, year to date, the ETFs that represent the current 2-year and 10-year Treasury securities are even-Steven. But they took very different routes to get there.
I see more evidence that the short-term part of the yield curve will begin to slide faster than the long end does. Translation: The yield curve will likely un-invert during Q4, if not sooner. For investment purposes, that could continue to benefit the CORE portfolio and any other portfolio that has a chunk of assets in short-term Treasuries. Because, other than T-bills, there is not only still decent yield there, but some lower-risk price appreciation potential, too.
Recommended Action: Buy SPHD.
