The Bear Market No One's Paying Attention To

Jerome Powell has one goal in mind as the Federal Reserve chairman... to kickstart our economy at any cost.

I explained what was happening to DailyWealth readers in July. Powell had recently announced plans to pump up to $6 trillion into the U.S. economy.

Now all those dollars floating around are helping companies ride out today's pandemic. And with record-low interest rates, businesses can take out cheap debt to stay afloat.

I knew that would lead to a massive boom in asset prices. And it has, with stocks soaring from the March lows to new all-time highs.

That trend is playing out exactly as I expected. It's why I believe the latest pullback will give way to even higher highs. But there's another side effect to Powell's massive monetary stimulus...

It's a bear market that few are paying attention to... but one with huge implications.

Let me explain...

Pumping more dollars into the system doesn't just cause asset prices to rise. It also puts pressure on the value of the U.S. dollar.

When you increase the number of dollars available, it means those dollars are worth less. It's the other side of easy-money policies. And it causes the value of the dollar to fall.

Not surprisingly, that's exactly what has happened since the Fed started pumping money into the system in March. Take a look...

The chart above shows the U.S. Dollar Index ("DXY"). It's the value of the dollar versus a basket of other major global currencies. And it's the easiest way to track the value of the dollar in real time.

You can see that the index peaked above 102 in March. Since then, it has absolutely crashed... falling more than 10%.

That might not seem like much. But major currencies tend to move at a glacial pace. A 10%-plus decline over a couple of years would be news... For it to happen in less than six months is shocking.

This decline likely isn't over yet, though. Powell put even more pressure on the dollar last month when he gave a speech at the Kansas City Federal Reserve Bank. He made it clear that the easy money is here to stay.

You see, the Federal Reserve has historically targeted 2% inflation. Since we've had little inflation for years, Powell's new plan is to spark inflation above 2%. The Fed wants to overshoot the old target. And it plans to keep inflation above 2% for a while.

All this means the Fed will keep easy-money policies in place... for as long as it takes. And that will put more pressure on the U.S. dollar along the way.

This has already caused a bear market in the dollar... one that few realize is happening. And it's nearly certain to continue.

As an investor, you have to take advantage of what's going on. There are plenty of ways to do that... But one of the best ways to profit from a falling dollar is emerging market stocks. Tomorrow, I'll show you why.

Good investing,

Steve

P.S. My colleague Brian Tycangco is tracking the incredible opportunity in emerging markets. The dollar decline is only part of the story. And he says that today's setup is as good as he's ever seen... with the potential for triple- or even quadruple-digit gains. You can get the full details right here.

Further Reading

"The Federal Reserve is rewriting the definition of 'saving,'" Vic Lederman writes. With the Fed effectively turning interests rates negative, you need to understand this change if you have any hope of preserving your wealth... Read more here: The Fed Just Changed the Definition of Saving.

"The Federal Reserve is pumping trillions of dollars into the system," Steve says. And when this sort of thing happens, it means big upside ahead for stocks. The trend is already in our favor. Don't let this opportunity pass you by... Get the full story here: You've Got to Own Stocks Now.

Market Notes
RETAIL HEADWINDS CAN'T BEAT EVERYDAY GOODS AT CHEAP PRICES

Today, we’re checking in on a thriving essential retailer…

The coronavirus pandemic has accelerated the “retail apocalypse.” Mall-based retailers like JC Penney, J. Crew, and Neiman Marcus have all filed for bankruptcy in recent months. But some businesses are edging out the competition by selling what people really need – and going where they need it. Today’s company is a perfect example…

We’re talking about Dollar General (DG). The $50 billion discount retailer sells cheap groceries and household products at more than 16,000 stores across the U.S. Its high store count ensures that you’re never too far from a Dollar General. And its cheap pricing helps business stay strong during economic downturns. We saw this during the pandemic… In its most recent quarter, Dollar General’s sales surged 24.4% to $8.7 billion.

As you can see in today’s chart, DG shares have rebounded strongly off their March lows. The stock has risen nearly 50% since March 25, and it recently hit a new all-time high. As long as people still need essential goods at cheap prices, this stock should continue higher…