As of writing, the rolling 20-day correlation between USD/JPY and the S&P 500 is 0.80, while the rolling 50-day correlation is even higher at 0.94. As the 40-hour chart below shows, this correlation has been particularly tight of late.
Our casual evidence indicates that government spending boosts gross domestic product during recessions. But we don’t really have a satisfying, formal, modern, rigorous, academic macroeconomic model that explains this fact.
While many of the consequences of stimulating economic growth through currency devaluation and cuts in interest rates are known and intended, some are not. In the case of Japan’s lost decade, for example, a depressed currency and low interest rates led to carry trading.
As you all know, over the last five years we have been in one of the strongest bull markets in the history of the U.S. stock market. As you also know the economy over the last five years has not exactly been booming.