The recent macro moves have been nothing short of historic. In the past three months:

  • U.S. Dollar Index is up +7%
  • 10-year Treasury yield: 2.33% (versus 1.54% in August)

“We’re seeing generational moves now in both these variables which really we have to pay attention to as financial services analysts,” Hedgeye Financials analyst Jonathan Casteleyn said on The Macro Show recently. Investors should have a number of questions about what comes next.

Here are some answers.

Q: Is the 30-year bull run in bonds over?

A: “Yields appear to have bottomed and for the first time in a long time fixed income starts to get more attractive for certain investors,” Casteleyn says. “Higher yields also support a higher dollar.”


Q: Can the U.S. dollar get stronger from here?

A: “There’s a lot of overhead space for the U.S. Dollar to appreciate. We were at 120 on the U.S. Dollar index [DXY] in the early 2000s period and we’re still just over 100 right now,” Casteleyn says. “You could see another 20% appreciation for the dollar to backfill that 120 level on the DXY.”

Below are a few investing ideas based on these developing trends, according to Casteleyn: 

  • Strong Dollar = U.S. Domestics Plays Outperform Multinationals – “If you have foreign earnings, like Citigroup (C) does, you’re going to now bring them in at a higher dollar so a smaller amount. Really US companies are going to outperform multinationals because US profits come in in smaller dollar amounts as the dollar appreciated; one exposure to be cognizant of there.”
  • Rising Rates = Buy Money Market Fund Managers – “Higher Rates, over time, is obviously very good for the money management business on the cash side. I.e. cash will look attractive again and some of their fee waivers at BlackRock (BLK), Federated Investors (FII), Legg Mason (LM), Charles Schwab (SCHW) could really come off. So there’s a fundamental case to be made for those stocks as longs and that’s been changing over the past couple of weeks since the election.”