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April 4, 2019, 9:54 a.m. EDT

Buy dollars even if stocks keep rising, says Goldman alumnus who predicted the financial crisis

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By Barbara Kollmeyer, MarketWatch


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All about the dollar...

It’s T-minus one day to jobs data, and further upward momentum for stocks appears to be partially riding on hopes we won’t see a repeat of February’s paltry payrolls gain in the U.S..

Potentially positive data “will reinvigorate the bullish sentiment taking equities to new highs,” predicts Konstantinos Anthis, head of research at ADSS. Or at least maybe pull the S&P 500 off its mini roller coaster and send it solidly one way or another. Weekly jobless claims, meanwhile, fell to the lowest level since December 1969.

Read: Disappointing jobs data Friday could wipe out investor optimism

For now, things look sluggish, perhaps not helped by news that German manufacturing orders collapsed, which means investors are now keeping a beady eye on further trade headlines.

Enter our call of the day from Goldman Sachs alumnus, Raoul Pal, who predicted the global financial crisis. He sees trouble on the horizon for the world’s economies and is advising investors to buy bonds and the dollar.

Pal, who writes The Global Macro Investor newsletter, which is followed by the world’s biggest hedge funds, sees few places for investors to park their money right now. While he’s not bearish on U.S. stocks, he still thinks the dollar is a better bet and the recent pullback for bonds is a buying opportunity for those who agree with his gloomy global view.

“Even if the stock market continues higher, it’s going to pump in capital from abroad,” he said in an interview with Real Vision , a TV service he co-founded. Europe, the U.K. and Japan all need to put money to work in the U.S., whether its bonds or the equity market, which should help the dollar “break higher,” he said.

Pal has been warning about a slowing global economy since last August, advising investors to buy bonds, which he says eventually turned into “the best trade in the world.” While bonds have recently curbed that run, which he partly blames on some upbeat data out of China, he’s worried about falling imports and exports across Asia and trouble for Europe, notably Germany, among other things.


Real Vision/Raoul Pal

“The safest place in the global economy right now is the U.S. bond market and the U.S. dollar. And that’s why global growth matters in this story,” he said.

Read: Despite big first-quarter rally, stocks still lag other assets in making up lost ground

He’s not screaming U.S. recession, but he’s also not buying the increasingly popular view that the economy will be just fine after a first-quarter hiccup. And he sees the Fed shifting its narrative to a rate cut.

As for his call to buy the dollar, he’s waiting for the ICE Dollar Index /zigman2/quotes/210598269/delayed DXY +0.15% , which measures the value of the greenback against a basket of six major currencies, to hit 98. Investors can then bet on a dollar rally in a number of ways, the easiest of which is to buy it via an exchange-traded fund such as Invesco DB US Dollar Index Bullish Fund /zigman2/quotes/209727862/composite UUP -0.22% .

Or, wait for the dollar index to reach that key level and “then start adding short euros, short pound, short Aussie, short emerging markets” — bets that those currencies will weaken as the dollar powers higher, says Pal.

The market

The Nasdaq /zigman2/quotes/210598365/realtime COMP +0.07% , Dow /zigman2/quotes/210598065/realtime DJIA -0.19%  and S&P 500 /zigman2/quotes/210599714/realtime SPX +0.0020% are modestly higher at the start of trade. See Market Snapshot for more.

The dollar /zigman2/quotes/210598269/delayed DXY +0.15% and gold are steady, while crude is ticking up. A rate cut in India has hit the rupee /zigman2/quotes/210562010/realtime/sampled USDINR -0.6268%  .

Read: Brexit chaos spurs record flows to sterling-hedged funds

/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
98.42
+0.15 +0.15%
Volume: 0.00
Sept. 20, 2019 7:35a
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/zigman2/quotes/209727862/composite
US : U.S.: NYSE Arca
$ 26.76
-0.06 -0.22%
Volume: 517,202
Sept. 19, 2019 8:00p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,182.88
+5.49 +0.07%
Volume: 1.58M
Sept. 19, 2019 5:16p
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,094.79
-52.29 -0.19%
Volume: 216.44M
Sept. 19, 2019 5:17p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
loading...
/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
98.42
+0.15 +0.15%
Volume: 0.00
Sept. 20, 2019 7:35a
loading...
/zigman2/quotes/210562010/realtime/sampled
US : Tullet Prebon
70.9450
-0.4475 -0.6268%
Volume: 0.0000
Sept. 20, 2019 7:31a
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