Been thinking about this scenario and honestly can’t wrap my head around it. If USD crashes hard, do stocks just tank across the board or do some sectors actually benefit?
Seems like there should be clear winners and losers but every analysis I read gives different answers.
Stock prices behave unpredictably during a dollar collapse because they represent ownership in real assets, not just dollar amounts. Companies with tangible assets like properties, machinery, and stock often retain value better than cash.
The debt situation matters. Companies with fixed dollar debt benefit since they repay with cheaper dollars. However, those with variable rates or foreign debt struggle.
Market dynamics also play a role. Stocks may spike as investors move away from cash but can crash when foreign investors pull out. This leads to reduced trading volume and unreliable pricing.
Some sectors may benefit others will drop.
Companies with foreign revenue streams tend to do better when the dollar weakens because their overseas earnings convert back to more dollars.
Exporters like Boeing or Caterpillar usually see their products become more competitive globally. Multinational tech companies also benefit from this currency translation effect.
The flip side is anything dependent on imports gets squeezed hard by rising costs.
Yeah the whole thing is pretty complex. Different scenarios play out totally different ways.
Depends on how fast the dollar falls and what triggers it.
If it’s gradual inflation eating away at the dollar, companies with pricing power usually do okay. Think utilities, consumer staples, energy. They can raise prices to match.
But if we’re talking collapse collapse - like confidence totally gone - then everything gets messy. Foreign investors dump US assets hard. Even strong companies take a hit because panic selling doesn’t discriminate.
One thing that helped me understand this better was looking at what happened during the 70s stagflation period. Commodities and foreign currency plays did well while growth stocks got hammered.
The tricky part is timing it. By the time you know the dollar is really collapsing, the market has probably already priced in a lot of the damage.