Since late May when the S&P 500 crossed the 3000 mark, the index is up roughly 4% in USD in a few weeks. However, when priced in EUR the index is flat on the same period.

So 90% of the move over 3000 in US dollar S&P was merely currency translation !

It wasn't a real rally from the European point of view. This is important : if a European corporation did business unhedged in USA during the period in question (past 30 days), they made no money. If a European invested here during the second leg up, they made no money either. The entire second move up is explained by dollar weakness, NOT lifting of lockdowns, NOT stronger than expected US economic data, NOT the expansion of the Fed's balance sheet, NOT receding Covid infections, NOT hedge fund short covering, NOT Robinhood mania, NOT stay-at-home technology stocks being super-hot - just the USD weakening against the EURO…

We all tend to assess the performance of our investments by the currency we use in our daily lives, when at least we should do it against a basket of currencies. Indeed, if the value of an asset appreciates only in our reference currency, it means that it is not the value of the asset which increases, but that of your currency which decreases!

Produced in partnership with The Bear Traps Report / Bastien Chenivesse