Over the past year the U.S. dollar has had a remarkable recovery.
A strong dollar does have some advantages:
• When the dollar goes up things bought with it become cheaper – one reason that oil, gas and gasoline prices are plunging.
• With oil and gas prices down the average person has more money to spend on clothes, boats and big screen TVs.
If the dollar rises too quickly it will create head winds for the U.S economy and corporations. True, the U.S. economy is just bumbling along but it is stronger than Europe that is still flat on its back.
The strong dollar does have disadvantages:
• American exports are more expensive.
• Companies in the S&P 500 get about 33% of their sales from overseas and those sales are worth less when converted back to dollars. Hence, profits will drop leading to a falling stock market.
• U.S. priced products become more expensive against imports. Thus, Ford and GM products would be at a disadvantage to those made by Toyota.
• U.S. companies may have to cut prices overseas to be competitive thus making profits lower and further hurting the stock market.
So many people complained about the weak dollar. They all wanted a super strong dollar but did not realize how it hurts competition and the stock market.