The dollar has enjoyed a strong rally in recent weeks, surging to a six-year high against the yen last week and a 22-month high against the euro Thursday.
That's not a good thing for stocks, says Josh Brown, CEO of Ritholtz Wealth Management.
"The dollar has been on a tear. To me, that is the number one story for the investment markets of the late summer, early fall," he tells
Yahoo. "The effect that it has on the equity markets is really interesting."
A strong dollar particularly hurts companies that export or earn much of their revenue overseas. That's because revenue earned on sales in foreign currencies are now worth less in dollar terms.
The three sectors that are most vulnerable to dollar strength are industrials, materials and energy, Brown says. And those are the sectors with the highest percentage of stocks trading below their 200-day moving average, he notes.
Without gains in those sectors, it will be difficult for the S&P 500 index to reach new peaks, Brown says.
Meanwhile, many commentators warn that the world is engaged in a currency war. James Rickards, a portfolio manager at West Shore Group, is one of them.
"I think this is one long currency war," he tells
RT news service. "We are now getting into more of a battle, more of a confrontation. The U.S. dollar is the only strong currency that cannot last. The U.S. cannot have a strong currency, because we are desperate for inflation."
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