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Dow 30 Return Rate vs. USD Trade Weighted Currency Appreciation Rate
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DJIA Return Rate
Simultaneous Change
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DJIA Return Rate
Subsequent Change
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1% Rise in USD Appreciation Rate over 1 Year
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1% Decline in USD Appreciation Rate over 1 Yr
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It indicates that a 1% USD Trade Weighted Currency Appreciation Rate increase over
a 12 month period, (from 5% to 6% for example) has typically been accompanied by a
0.21% Dow 30 Return Rate decline during that year and a 0.10% Dow 30 Return
Rate increase the following year.
It also indicates that a 1% USD Trade Weighted Currency Appreciation Rate decline
over a 12 month period, (from 5% to 4% for example) has typically been accompanied
by a 0.49% Dow 30 Return Rate increase during that year and a 0.06% Dow 30
Return Rate decline the following year.
The center column shows the change in the Dow 30 Return Rate over 12 months,
depending on whether the period experienced a rising or falling USD Trade Weighted
Currency Appreciation Rate. The right column shows the change in the Dow 30
Return Rate during the year following an increase or decrease in the USD Trade
Weighted Currency Appreciation Rate.
The data history in the middle column shows a significant tendency for the
two rates to move inversely to each other during the same time period.
The evidence for using the previous 12 month change in the USD Trade
Weighted Currency Appreciation Rate to predict the future direction of the
Dow 30 Return Rate is insignificant (right column).
Annual rates are shown in the graph and calculations.
How Do I Use This Information?
There are many investment theories that are well publicized in the financial press.
Even though little or no historical data may be offered as evidence for such theories,
many investors use them subconsciously, if not intentionally.
Example Theories: Rising Inflation is bad for the stock market. A booming housing
market is good for the S&P 500 stock index. A falling fed funds rate means that long
term interest rates will fall.
There are many such theories. In this site, long term investment and economic data
is tested against decades to determine whether a relationship actually exists or not.
This historical correlation provides a vital aid in interpreting the often confusing
behavior of the financial markets. The perspective gained may be the difference
between staying the course or being blown and tossed by every investment theory
that is popular at the moment. What the majority assumes to be true, often is not. In
the final analysis, readers are admonished to follow the evidence, wherever it leads.
This page tests the relationship between the USD Trade Weighted Currency
Appreciation Rate and the Dow 30 Return Rate. Suppose you are making a business
or investment decision. Suppose again that the decision hinges on whether the USD
Trade Weighted Currency Appreciation Rate and the Dow 30 Return Rate tend to
move in the same or opposite directions. The data, graphs, and analysis above will
enlighten you. You'll discover whether they move with, inversely to, or independently
of each other.
Suppose that the USD Trade Weighted Currency Appreciation Rate has risen sharply
and that you need to know what direction the Dow 30 Return Rate is headed in the
near future. Does the recent increase in the USD Trade Weighted Currency
Appreciation Rate provide a clue about the future direction of the Dow 30 Return
Rate? The data history, graph, and analysis above will show you how the Dow 30
Return Rate has performed after increases in the USD Trade Weighted Currency
Appreciation Rate. You'll see if one indicator has been likely to signal a change in
another. This is not intended as a prediction, but merely as a clue to the future from
the annals of history. No man knows the future, unless he has the ability to control the
future.
This site compares data series for interest rates, stock indexes, economic indicators,
currency exchange rates and real estate values. Suppose that you want to see how
stock indexes are influenced by interest rates or the value of the dollar. Click one of
the stock index links on the right side of any page. Links to our multi-series graphs
and correlation analysis may be found at the bottom-center of the stock index pages.
Formula for periods with a rising USD Trade Weighted Currency Appreciation
Rate:
1) Change in the Dow 30 Return Rate DURING periods with a rising USD Trade
Weighted Currency Appreciation Rate:
The abbreviated formula is: (Dow 30 Return Rate Change / USD Trade Weighted
Currency Appreciation Rate Rise) x 1% = Published Rate.
The complete formula is: [(Average change in the Dow 30 Return Rate over all rolling
12 month periods with a rising USD Trade Weighted Currency Appreciation Rate) /
(Average Rise in the USD Trade Weighted Currency Appreciation Rate over the same
12 month periods)] x 1% = Published Rate.
2) Change in the Dow 30 Return Rate AFTER a rising USD Trade Weighted Currency
Appreciation Rate:
The abbreviated formula is: (Subsequent Dow 30 Return Rate Change / USD Trade
Weighted Currency Appreciation Rate Rise) x 1% = Published Rate.
The complete formula is: [(Average change in the Dow 30 Return Rate during the 12
months following any rolling 12 month base period with a rising USD Trade Weighted
Currency Appreciation Rate) / (Average Rise in the USD Trade Weighted Currency
Appreciation Rate over the 12 month base periods)] x 1% = Published Rate.
Formula for periods with a declining USD Trade Weighted Currency
Appreciation Rate:
1) Change in the Dow 30 Return Rate DURING periods with a declining USD Trade
Weighted Currency Appreciation Rate:
The abbreviated formula is: (Dow 30 Return Rate Change / USD Trade Weighted
Currency Appreciation Rate Decline) x -1% = Published Rate.
The complete formula is: [(Average change in the Dow 30 Return Rate over all rolling
12 month periods with a declining USD Trade Weighted Currency Appreciation Rate) /
(Average decline in the USD Trade Weighted Currency Appreciation Rate over the
same 12 month periods)] x -1% = Published Rate.
2) Change in the Dow 30 Return Rate AFTER a decreasing USD Trade Weighted
Currency Appreciation Rate:
The abbreviated formula is: (Subsequent Dow 30 Return Rate Change / USD Trade
Weighted Currency Appreciation Rate Decrease) x -1% = Published Rate.
The complete formula is: [(Average change in the Dow 30 Return Rate during the 12
months following any rolling 12 month base period with a declining USD Trade
Weighted Currency Appreciation Rate) / (Average decline in the USD Trade Weighted
Currency Appreciation Rate over the 12 month base periods)] x -1% = Published Rate.
Rolling 12 Month Periods Defined:
Overlapping 12 month periods in a monthly data base.
For example:
In the 24 month period included in 2000 - 2001, there are 13 complete rolling 12
month periods. The first is January, 2000 - December, 2000. The second is February,
2000 - January, 2001. The third is March, 2000 - February, 2001 and so on. The last
complete rolling 12 month period in the 2000 - 2001 period is January, 2001 -
December, 2001.
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