[rwmj]

Only if you convert it at a loss and are unable to wait for USD to recover. If (and it is, admittedly, a big assumption) we assume that USD and EUR are broadly stable currencies over the long term, then short term changes in the ratio don't matter for long term investors. You're buying a share of productive capacity, the currency it is listed in doesn't matter.

[jacquesm]

Only if you convert it at a loss and are unable to wait for USD to recover.

If you need to wait for it to recover you have lost money.

Besides, who says it will recover?

[Dylan16807]

It's reasonable to assume they're broadly stable, but being broadly stable doesn't mean a drop will "recover". There's no specific ratio that the currencies are being pushed to. Permanent changes in the baseline can and do happen.

> You're buying a share of productive capacity, the currency it is listed in doesn't matter.

But I don't own a fixed percentage of production, I own a fixed number of shares and the number of shares can change. If the number of shares doubles, then my investment is worth half as much.

[rwmj]

> But I don't own a fixed percentage of production, I own a fixed number of shares and the number of shares can change. If the number of shares doubles, then my investment is worth half as much.

How is that related to currency changes? That can happen anyway regardless of the currency.

[Dylan16807]

It can happen in other situations, but the fact that it always happens with currency fluctuations is what's important here. When the dollar loses value, everything I own that's anchored to dollars loses value too. "buying a share of productive capacity" implies a counteracting effect, but there isn't one, because the amount of productive capacity represented by each share shrinks too.

[dgb23]

This is correct. A decent example would be comparing the CHF, EUR, USD over the last few decades. The CHF is to the EUR what the EUR is to the USD.

[compsciphd]

yes, but could one also argue that due to currency weakening, the S&P's growth can simply be due to the weakened currency?

If I can say something has an "absolute" value of X, but I denominate it in USD, which is normally 1:1 to X, then it's value in USD in X.

but if USD drops to being worth half an X, but its absolute value hasn't changed, it will now appear to be worth 2X in USD.

so why can't one argue, if the dollar weakened by 15%, but everything else being equal, one would expect dollar denominated stocks to appreciate (in dollars) by the same amount? And if the dollar would strengthen, we would expect the stock price to depreciate?

[mlrtime]

Because the SP500 is a better indicator of the market than USD. Also if you look at the global dollar index, it is right at par historically.

The companies in the 500 are mostly global companies, if the USD shrunk so much they would either be losing money, or it doesn't matter because the US market is so strong it dwarfs the others.

[piva00]

> The companies in the 500 are mostly global companies

Isn't that saying exactly what the parent comment mentioned? Since those companies are global, the growth of the S&P 500 which is USD denominated will track the devaluation of the USD as the underlying companies haven't lost value, the dollar has, and the S&P 500 would track that as growth in percentage to balance it.

I don't understand why they would be losing money since as you said they're global, and more untethered to the USD than the S&P 500.

[mlrtime]

I don't think they are losing money?

This is clearly the USD Global index dropping a few basis points, which is an active strategy. Look at the USD Index over 15 year period, there is nothing wrong with USD today.

[compsciphd]

I'm not arguing if the S&P is a better indicator of the US economy than USD or not.

What I'm asking, to me it seems if the USD drops in value, but everything else stays the same (i.e. GOOG hasn't lost any real value if measured in any other currency for instance). I'd expect GOOG to rise in USD terms (as its value has stayed constant).

Why wouldn't this be true (yes, there are a bunch of assumptions/complexities, and perhaps those assumptions/complexities break the argument), but at a very simplistic level is what I said wrong?

[matwood]

The USD and EURO being nearly on par was the exception. And given the current admins stated goals, I’m not sure we’re going to see the USD strengthen anytime soon. In fact, it’s more likely to get weaker.

[rsynnott]

> If (and it is, admittedly, a big assumption) we assume that USD and EUR are broadly stable currencies over the long term

Yeah, er, that's a very big if. There's no real reason to assume that, and history doesn't really bear it out.

If anything in the near term you'd probably expect the USD to weaken further vs the Euro; Trump seems _very_ keen to install a fed chair who'll cut rates even where not supported by inflation and employment numbers, whereas the ECB is more disciplined and less subject to political interference.

[KK7NIL]

You're the one making a big assumption: that this is a short term movement in the dollar.

Trump has made it clear he wants a cheaper dollar to make US exports more competitive and JPM is forecasting another 10% drop in the value of the dollar this year.

Just because the dollar and euro have been roughly level for over a decade doesn't mean that will remain true, currencies often go through pretty fast changes in relative values every few decades as their financial and geopolitical positions change. The pound drop around 2007~2009 is a good example of one such sudden but long term price shift.