Bet Your Bottom Dollar

Take a look at the above chart of the dollar. There are a couple of things to note: 1) The dollar moved up in the 90's along with the US's declining deficit and eventual surplus. Starting in 2002, the dollar began its long decline along with the US's growing budget deficit. The dollar busted through previous long term support reached in 1995 and 2005. The financial crisis has caused a re-evaluation of the dollar as a safe haven and it has climbed back to that support level. I believe that the dollar has seen its lows and will continue to strengthen (or at least not decline much.) The importance of this to your portfolio goes to your asset allocation. If you were invested in Europe for the past few years, you probably did very well. However, much of your gain was not due to the genius of your money manager it was due to the euro strengthening in relationship to the dollar. With a rising dollar, it will be difficult for European stocks to outperform American stocks. It's a good time to rethink your overseas investments.