Our first post in mid-August (Fed in a Box) recognized US dollar strength as a counter-weight to the Federal Reserve plan to initiate a series of rate increases. Our point was dollar strength had hurt corporate profits growth and cooled economic growth. The former was obvious when corporations reported quarterly earnings in the first half of 2015. The latter is increasingly evident. How? The Beige Book summarizes anecdotal information on current economic conditions in each of the 12 Federal Reserve Districts. It’s published eight times annually and contains around fifty pages of commentary. In the January report, the term “strong dollar” was referenced twice. In September’s report, “strong dollar” was uttered 14 times and in October, 15 times.
Emerging Markets weakness, spillover risk, a lack of inflation, and a strong US Dollar all combine to increase our confidence when the Fed can begin increasing rates, it will be a slow climb.