Donald Trump’s tenure as U.S. president has been a boon to U.S. stocks. But it has also been a disaster for the U.S. dollar – a consequence some analysts are attributing to political discord in Washington.
What’s Ailing the Dollar?
To be sure, the dollar’s sickly performance can be attributed to many factors. The Federal Reserve is tightening monetary policy, but is doing so against a meager economic backdrop that many say cannot support many more interest rate increases.
The greenback rose as traders bought the rumour of pending rate hikes, but has fallen as market participants sold the fact.
There’s also reason to believe that political discord in Washington is contributing to the dollar’s slide, now the longest in six years. The dollar has long been a symbol of America’s global economic might. That perception has come under scrutiny as the Trump administration struggles to implement its ambitious economic reforms.
Currency is a relative price, which means it tells you how a country is perceived relative to others. The course of American politics over the past seven months is aptly reflected in its currency. A divided Republican party that leads to further discord on key legislative reforms may impact the greenback in more severe ways.
At the time of writing, the dollar index (DXY) is down 8.6% year-to-date. That puts it among the world’s worst-performing currencies.
Cryptocurrency: The Case for Non-Correlation
Bitcoin and its altcoin competitors have faced heavy volatility as of late, but there’s no denying their outstanding year-to-date performance. Bitcoin has more than doubled since these start of 2017, while ethereum has gained a staggering 2,200%. Although many have (perhaps rightly) attributed these gains to speculation, there’s something much more fundamental at play.
One of the biggest draws of cryptocurrency-as-an-asset is its lack of correlation with other asset classes. Unlike the dollar or even gold, bitcoin’s performance has nothing to do with how other assets perform.
This was recently brought to our attention by researchers at ARK Invest, who found that bitcoin had a superior Sharpe Ratio when compared to other assets. The Sharpe Ratio measures average return based on the level of risk assumed. This information could come in handy for investors looking to diversify away from fiat currencies and the tightening grip of central banking.