US stocks experienced a pullback from record highs as the Federal Reserve began its September policy meeting, marking the end of notable streaks in the market. The Nasdaq Composite, which had achieved six consecutive record closes, succumbed to a slight decline, while the Nasdaq 100, which had a streak of nine days (though not all were records), also saw its run end.
In the broader market, the utilities sector ended a five-day upswing, although the reasons for this shift remain unclear.
The dollar faced significant downturns, experiencing what analysts describe as a “nosedive.” Currently hovering near three to four-year lows, the dollar’s year-to-date decline stands at 11.63%, a substantial fall for any currency, particularly for the world’s reserve currency. A five-year chart reveals the dollar is at its lowest level since early 2022, with little to prevent further depreciation. This devaluation has implications for those planning to travel to Europe, as the cost of vacations rises by approximately 11-12% due to unfavorable exchange rates.
Factors contributing to the dollar’s weakness include falling real yields, ongoing Federal Reserve easing, and concerns regarding the Fed’s independence. Recent confirmation of Stephen Myron may also be influencing market sentiment. Despite these challenges, foreign investors continue to favor US assets, particularly stocks, though many are hedging against currency risks, potentially impacting returns.
In a related development, gold has reportedly hit another record, surpassing $3,700 and inching closer to the $4,000 milestone. The surge in gold prices, which have increased 44% over the past year, reflects a broader positive trend for commodities amid dollar weakness. Silver futures have also experienced gains over the long term, although they faced declines recently.
The conversation turned to Bitcoin, described as “digital gold.” Bitcoin has doubled in value over the past year, although it has not reached new record highs in recent weeks. Analysts suggest that the current dollar weakness may bolster the case for cryptocurrencies alongside traditional commodities such as gold.
Looking ahead, market expectations remain high for the Fed’s upcoming announcements. Potential dissent within the Fed could lead to significant market reactions, whether due to perceived hawkish or dovish stances. This pivotal moment could reshape market dynamics, particularly with regards to the Fed’s composition and outlook heading into next year. Analysts agree that the coming days will be crucial for investors, with markets closely watching for any signs of dissent or shifts in policy.
