Felix Zulauf: Continued Rally Inward The Dollar Volition Last Bearish Near All Property Classes

The affair to know almost Felix is that he leans bearish but his analysis tin indicate upward but about opportunities.
In this illustration mayhap but about long/short twain merchandise or cross market/cross-asset stuff.
For what it's worth re: U.S. equities, nosotros run across no argue to alter our "S&P to 3000 together with in all likelihood 3300" target.

S&P 500 2,896.82, down4.70 (-0.16%)
DXY futures 95.54 upward 0.45 (+0.38%)

Lifted inwards toto from Financial Sense Online, August 28:

The next is a summary of our interview amongst Felix Zulauf, Founder together with President at Zulauf Asset Management AG, which tin live on listened to on our site here or on iTunes here.

After a pretty potent rally this year, the U.S.A. of America dollar has pulled dorsum slightly from its mid-August highs, helping to unloose but about of the pressure level on gold, commodities, together with emerging markets. Back inwards June, Felix Zulauf warned on our demonstrate that if the dollar rally continues, this represents a "deterioration of global liquidity" together with is "bearish virtually all property classes" aside from high character bonds. 

Here's what he had to enjoin on our plan (see Big Picture: Felix Zulauf on Trade Wars, Market Outlook, Gold, together with More).

Dollar Call
The dollar volition rest potent on a major tendency footing in all likelihood into adjacent yr because of the departure nosotros run across inwards the policy mix, Zulauf told listeners.

We bring an expansive financial policy inwards the U.S. against a backdrop of neutral financial policy overseas, he said. With tightening monetary policy inwards the U.S. relative to other major countries, the dollar should concord upward well, together with since nosotros spoke amongst Zulauf, the dollar has indeed strengthened.

The dollar is an of import barometer of the globe economy, he added, amongst a weak dollar unremarkably signaling globe economical expansion together with acceleration. This happens because the credit organization past times itself creates to a greater extent than dollars inwards a feedback loop amongst economical expansion.
If the dollar is stronger, this signals a slowdown because the global economic scheme isn’t creating equally many dollars, given that it is the global reserve currency.

“This is a deterioration of global liquidity,” Zulauf said, together with is “bearish inwards virtually all property classes except prime number character bonds. If you’re looking into prime number character bonds, yous bring the U.S. Treasuries together with yous bring High German bunds.”

Broad Implications
While Zulauf doesn’t detect High German bunds attractive here, he does run across value inwards U.S. Treasuries, which he thinks volition probable run across falling yields into year-end.
He’s also non besides concerned almost the growing deficit inwards the U.S. or rising inflation rates, because forces exterior the U.S. are dampening those factors.

If currencies exterior of the U.S. turn down further, nosotros volition bring input prices for the U.S. going down, non up. With emerging marketplace difficulties, the CPI dampened, together with amongst commodity prices together with unusual currencies both falling, the dollar should rest attractive.

From a macro indicate of view, this setup is non bullish for global equities, but he expects investors to live on able to enshroud inwards U.S. bonds for but about time. The strongest marketplace volition live on that of the U.S. because the uppercase menses volition lend back upward to our economy.

Also at Financial Sense:

 Dollar May Not Peak Until 2019, Says Marc Chandler