Line chart showing the U.S. Dollar Index against the relative performance of the S&P 500 Index versus the MSCI EAFE Index (our benchmark for DM equities) and MSCI EM Index (our benchmark for EM equities) from January 1990 to December 2023. The relative performance of both generally tracks the U.S. dollar. When the U.S. dollar rises, the S&P 500 tends to outperform international equities. Meanwhile, when the dollar weakens, the S&P 500 tends to underperform international equities.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 1990 to December 31, 2023.MSCI EAFE (DM) and MSCI Emerging Markets (EM) indexes are equity indexes which capture large and mid cap representation across DMÂ countries (excluding Canada and the U.S.) and EM countries around the world. The S&P 500 Index is a market-capitalization-weighted index considered representative of the U.S. stock market. The U.S. Dollar Index measures the value of the U.S. dollar relative to majority of its most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies. Index returns do not represent investment performance or the results of actual trading. Index returns represent general market results, assume the reinvestment of dividends and other distributions, and do not reflect deduction for fees, expenses or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities. Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
Key Takeaways
- A strengthening U.S. dollar has been a headwind for international equity prices since 2008.
- If the dollar weakens from current levels, it should provide some support to international equities.