Morgan Stanley Says that Dollar Surge Tends to End in Crisis.
The US dollar’s recent rally is creating an “untenable situation” for risk assets including stocks.
Wilson sees an “eventual low” for the benchmark S&P 500 Index coming later this year.
In upcoming days it will touch 3,000 to 3,400 point-level.
With Morgan Stanley calculation the surging dollar hurts the value of US companies’ international sales.
Every 1% change in the Dollar Index has a negative 0.5% impact on profits.
In 4th quarter S&P 500 earnings will face an approximate 10% headwind from the stronger currency.
The strategist, who correctly predicted the slump in US stocks this year.
Bank of America Corp. strategists, citing EPFR Global data, said on Friday.
What’s amazing is that this dollar strength is happening even as other major central banks are also tightening monetary policy at a historically hawkish pace.