Don't Bet on a Continued Dollar Rally

Last month's presidential election kicked off an "everything rally." And it wasn't contained to the financial markets.

We've also seen a spike in optimism and enthusiasm for the U.S. economy. American consumers are newly confident, expecting good things ahead.

And notably, this change in sentiment has also shown up in the U.S. dollar...

The dollar jumped 1.6% the day after the election. That's a massive single-day move for a major currency. Not only that, but the rally continued in the weeks that followed.

History shows you shouldn't bet on this trend, though. This currency rally is likely overdone... And we should expect a lower dollar in 2025.

In September, the U.S. dollar was flirting with a multiyear low. Then, it rallied into the election – and took off from there.

The buck rallied 7.1% in just eight weeks. It went from a year-plus low to a year-plus high along the way. Take a look...

We usually love to see run-ups like this in DailyWealth. That's because, for most assets, the trend is the most important driver of future prices.

But currencies are different.

Major global currencies can't rise or fall forever. They tend to go nowhere over the very long term. And when we see a big move in a short period of time, the long-term follow-through is far from a certainty.

To see what we should expect from here, I looked at similar eight-week rallies for the dollar since 2000. We've seen five other new eight-week rallies of 7% or more over that period... And if you had bet on them, you would have consistently lost money. Take a look...

The dollar has a history of flat performance over time. It has hardly risen at all since 2000. And buying after setups like we just saw could make matters worse.

Similar instances led to 1.7% losses over six months and 4.8% losses over a year... Not to mention, the dollar was down a year later 80% of the time.

This is the reality of major currencies. Quick rallies can happen. But they don't tend to stick around. That's likely what we'll see out of this latest jump in the dollar, too.

The postelection boom sent the buck higher... But don't expect that to last. History suggests the dollar is likely to fall in the months ahead.

Good investing

Brett Eversole