What does a weak $ mean for industry groups historically? No surprise materials are improving given history of relationship. We're still bullish on them. pic.twitter.com/UbLIZBt8oc
— RenMac: Renaissance Macro Research (@RenMacLLC) July 29, 2020
Today’s Chart of the Day was shared on Twitter by Renaissance Macro Research (@RenMacLLC). Yesterday, we highlighted the US Dollar and the impact that it’s having across asset classes. We explained that the recent Dollar weakness has provided a boost to Stocks, Commodities, and even Bitcoin. Focusing on Stocks for today, the chart here shows which industry groups within the S&P 1500 are most sensitive to changes in the US Dollar. Renaissance notes “A positive relationship means the group will decline when the Dollar declines, a negative relationship implies strength when Dollar weakens.” Notice that value-oriented and cyclical sectors like Materials and Energy tend to benefit from a weaker Dollar. On the other hand, Growth-oriented sectors like Software, Biotech, and Semiconductors tend to be hurt by a weaker Dollar. In a separate comment, JC Parets summed up the biggest takeaway from this chart – “Looking for sector rotation? Here’s your catalyst.”