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Dollar Dollar Bill, Y’all!

The greenback’s recent rally could have legs.

The U.S. dollar is lighting up the charts, rallying for the past ten weeks (see the chart). That’s the greenback’s longest winning streak since mid-2014 when it went on a 12-week tear.

Source: Bloomberg, as of 9/27/23

One major driver of the dollar’s recent strength versus other currencies is the U.S. economy’s relatively strong outlook. Inflation has come down faster here than in Europe, giving the Fed greater monetary policy flexibility and enhancing demand for dollar assets.

Conversely, last week’s unexpected decisions by the Bank of England and the Swiss National Bank to hold their interest rates steady despite stubbornly high inflation highlighted the challenge those nations (along with others that are net importers of energy) face in striking a balance between bringing down high prices and fostering economic growth.

We believe the general recent outperformance of U.S. equities over foreign stocks could potentially continue for some time, given the relative strength of the economy and because the 50-day average on the ICE U.S. Dollar Index recently rose above the index’s 200-day moving average—a technical signal suggesting further upward momentum to come. That said, we remain watchful for signs of deterioration in the U.S.’s growth prospects versus the rest of the world’s, which could cause the dollar to reverse course and prompt a shift in our geographic equity allocation.

This commentary is written by Horizon Investments’ asset management team.

Past performance is not indicative of future results.

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments.

The ICE U.S. Dollar Index is a geometrically averaged calculation of six currencies weighted against the U.S. dollar containing six component currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. An index’s composition may not reflect how a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. Individuals cannot invest directly in any index. Indices are unmanaged and do not have fees or expense charges, which would lower returns.

The investments recommended by Horizon Investments are not guaranteed. There can be economic times when all investments are unfavorable and depreciate in value. Clients may lose money.

Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves risk of loss, and in periods of market growth, risk mitigation strategies can be expected to lag in performance behind equity strategies that do not focus on risk mitigation.

This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Forward-looking statements cannot be guaranteed.

Other disclosure information is available at www.horizoninvestments.com.

Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC

©2023 Horizon Investments LLC

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