The dow in euros

Zeitenwende, a German-language blog from Switzerland I subscribe to made a very good point this past holiday weekend after the Dow reached bear territory. U.S. investors had lost 20% on the Dow, but European investors would have lost much more.

The U.S. stock market return looks much worse in Europe than it does in the U.S. because the dollar has fallen by so much. The blogger at Zeitenwende, Hansruedi Ramsauer, says:

For an investor there is only one return that is relevant: the return in one’s home currency, in which one pays the bills. When one looks at foreign shares indices, this is sometimes forgotten. That can be painful as the following example demonstrates. The performance of the Dow Jones in euro has almost reached its lows from 2003.
(My translation)

Click here to see the chart.

This analysis, showing the Dow back down to 7211 in Euro terms should underscore for any American the downside to an inflationary monetary policy. Inflation weakens one’s home currency. That may be great for exporters, but it actually makes everyone else poorer.

Keep this in mind as the Fed continues to be dovish on inflation.