Chris Ciovacco

About the Author Chris Ciovacco

Chris Ciovacco is the founder and CEO of Ciovacco Capital Management (CCM), an independent money management firm serving individual investors nationwide. The thoroughly researched and backtested CCM Market Model answers these important questions: (1) How much should we allocate to risk assets?, (2) How much should we allocate to conservative assets?, (3) What are the most attractive risk assets?, and (4) What are the most attractive conservative assets? Chris is an expert in identifying the best ETFs from a wide variety of asset classes, including stocks, bonds, commodities, and precious metals. The CCM Market Model compares over 130 different ETFs to identify the most attractive risk-reward opportunities. Chris graduated summa cum laude from The Georgia Institute of Technology with a co-operative degree in Industrial and Systems Engineering. Prior to founding Ciovacco Capital Management in 1999, Mr. Ciovacco worked as a Financial Advisor for Morgan Stanley in Atlanta for five years earning a strong reputation for his independent research and high integrity. While at Georgia Tech, he gained valuable experience working as a co-op for IBM (1985-1990). During his time with Morgan Stanley, Chris received extensive training which included extended stays in NYC at the World Trade Center. His areas of expertise include technical analysis and market model development. CCM’s popular weekly technical analysis videos on YouTube have been viewed over 700,000 times. Chris’ years of experience and research led to the creation of the thoroughly backtested CCM Market Model, which serves as the foundation for the management of separate accounts for individuals and businesses.

Is the Strong Dollar a Showstopper for Stock Bulls?

Easy To Blame The Dollar

During the May 26 selloff in stocks, we heard numerous “blame it on the strong dollar” comments similar to the one below via CNBC:

“I think the pressure today is coming from the stronger dollar,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “The focus this week is the yield curve and the stronger dollar.”

Stocks Gained Over 70% With Strong Greenback

While the value of the U.S. dollar impacts countless areas in the global economy, a logical question is how concerned should equity investors be about a strong dollar? As shown in the chart below, the S&P 500 gained over 70% during a period of U.S. dollar strength between 1982 and 1984. Therefore, taken in isolation, a strong dollar is not a reason to cash in your stock portfolio.

A Bigger Concern Is The Length Of The Bull Run

Regardless of the dollar’s impact, there are three reasons telling investors now is a good time to water test their portfolio for the next inevitable bear market:

  1. The bull market is quite mature in historical terms.
  2. Bear markets can wipe out gains quickly.
  3. A new and different landscape may be emerging as interest rates come off of multi-decade lows.

 

Back To History And The Dollar

Can we find another period in recent history when stocks and the U.S. dollar rose simultaneously? Sure we can – as shown below, the S&P 500 nearly tripled in value between 1995 and early 2000. Over the same period, the U.S. dollar surged over 25%.

Investment Implications – The Weight Of The Evidence

Tuesday’s big drop in stocks did not constitute a material change to the hard evidence when viewed on our investment time horizon.

With a big GDP number coming Friday, it is important to remain flexible and open-minded. The market will guide us if we are willing to listen.