View from the Observation Deck

1. The value of the U.S. dollar declined 9.6% against a basket of major currencies (U.S. Dollar Index) from the end of the last bear market (3/9/09) through 12/28/11, according to Bloomberg.
2. Over that same span, the price-only cumulative return for the S&P 500 was 84.7%. The cumulative total return, which includes the reinvestment of dividends, was 95.9%.
3. Weakness in the dollar can effectively boost the performance of exports by making U.S. products more competitively priced in the global marketplace. Japan, for one, has been quite vocal in opposing the drop in the U.S. dollar.
4. S&P 500 companies garnered 46.3% of total sales from outside the U.S. in 2010, according to Standard & Poor's. So the global marketplace is critical for U.S. multinationals.
5. U.S. exports rose 42% from 3/31/09 through 10/31/11 (latest available month), according to the Bureau of Economic Analysis.
6. The delay in stabilizing the sovereign debt crisis in Europe, particularly in regards to the mounting deficit challenges in Greece, provided an unexpected lift to the U.S. dollar in the past 8 months due to a flight to quality.
7. From 4/29/11 through 12/28/11, the U.S. dollar appreciated 10.4%, as measured by the U.S. Dollar Index (DXY). The S&P 500, however, fell 7.0% over that span.
8. While we acknowledge that many things influence the performance of stocks, the value of the dollar has been a theme throughout this bull market.
9. Keep an eye on Europe. If a stabilization plan is forged and well-received by investors, we could see the dollar resume its downward trend. And that has been good for stocks.