If you want to know which global markets to own, you need to understand what’s happening with the U.S. dollar.

It’s really that simple… It’s a major investment “tell.”

As I explained yesterday, U.S. stocks tend to do well when the dollar is rising. However, if the dollar is falling, you really want to own emerging markets. They have a history of leading to huge gains during that setup.

This relationship holds true today…

The U.S. dollar experienced a major turning point at the start of this year. And it could have huge implications in the months ahead.

Today, I’ll share where the dollar says we should be investing right now…

Yesterday, I said that emerging markets beat U.S. stocks through the end of 2020.

Few people realize this, given how much U.S. stocks soared after their pandemic lows. But it’s true.

After that, the U.S. dollar bottomed in early January before taking off once again…

When the U.S. dollar turned higher, it started to show up in market performance yet again. Emerging market stocks were no longer the clear winner.

Since the U.S. dollar’s recent low on January 5, U.S. stocks have been leading the way. Take a look…

The S&P 500 is up 27% since January 5. And emerging market stocks are actually down 3% over the same period.

In other words, U.S. stocks are back in the driver’s seat again today. But that’s not all… This outperformance should continue for months – or perhaps even years.

As I said, the U.S. dollar bottomed in January. That means the current trend has been in place for less than a year. Even more, the dollar just hit a new 52-week high in late September.

So if the recent uptrend is any indication, a new boom in the U.S. dollar is underway. And it can last much longer from here…

If you look back over the past several decades, you’ll see that bull markets in the U.S. dollar tend to last for years…

Take the late 1990s rally, for example. The dollar boomed for five straight years. The U.S. Dollar Index soared from 80 in April 1995 to 118 in October 2000… That’s a 48% jump.

The dollar also rallied for five straight years from mid-2011 through late 2016. It was another lengthy boom, during which the U.S. dollar’s value soared 42%.

Now, to be fair, I did recently share that we could see an eventual peak in the dollar. Futures traders love the asset – and that’s usually a sign that a reversal is coming. But we’re still nowhere near peak levels of sentiment. And that means the current trend could continue from here.

If this turns out anything like the U.S. dollar’s multiyear bull runs of the past, this move is just getting started…

In short, thanks to this investment “tell,” we know when to put our money in U.S. stocks or emerging market stocks.

When the dollar is falling, emerging market stocks are the better bet. But today, it’s the opposite scenario… U.S. stocks will likely soar alongside the value of the dollar in the months ahead.

Don’t get caught on the sidelines when it happens.

Good investing,

— Chris Igou

Strange change at your bank [sponsor]
At least 41 major US banks have just made a drastic change to the way money in America works. It could have some major implications for you, your money and your retirement. But it's crucial you understand what's happening, before these changes get applied to your bank account. Here's everything you need to know.

Source: Daily Wealth