If that turns out to be the case, the tangled web of currencies and corporate earnings could make it tough for U.S. markets to maintain their recent dominance. While a rising dollar hurts the near-term performance of non-U.S. investments (when translated back into dollar terms), over longer timeframes weaker foreign currencies can improve the competitiveness of businesses outside of the U.S.. Emerging markets in particular may benefit from stronger potential growth and attractive valuations, making them a compelling long-term investment opportunity.
An Entangled Web of Monetary Policy, the Dollar, and Overseas Stocks
Thanks in part to the prospects of an accelerated pace of Federal Reserve rate hikes, many expect continued strength in the U.S. dollar as we head into 2017.