Investors Finally Reducing Exposure To U.S. Stocks

January 25, 2014

U.S. stocks traded sharply lower this week. The Dow was down over 300 points on Friday alone, closing at the lows of the day. The U.S. dollar also lost ground with the dollar index, DXY, off significantly for the week.

Since the financial crisis there has generally been a reverse correlation between U.S. stocks (SPY) and the U.S. Dollar. When investors felt nervous they sold stock and went to cash (U.S. Dollars). It appears that is changing.

This indicates that the beginning of a global financial recovery are indeed underway. Money is leaving the safe-haven of the U.S. Dollar and overpriced stocks and finding bargains in other corners of the globe.

It would appear that money is flowing into European stocks, especially in the peripheral countries such as Ireland, Spain and Italy.

Many in the financial community are citing credit concerns in China as the primary catalyst for today's U.S. stock selloff. This may be but I would not look for China to pose any significant threat as the developed countries are getting back on their feet and will likely be consuming more (including more from China).

Dow Stock Index plummeted 311 points to close at 15879.


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