After a spike in positive sentiment among individual investors around the New Year, enthusiasm has been a bit more tempered in the last three weeks, falling by over 14 percentage points from its recent high on 1/4.  According to the weekly sentiment survey from AAII, bullish sentiment dropped from 54.1% last week to 45.45% this week.  That’s the lowest level of bullish sentiment since mid-December but is still well above the bull market average of just under 37%.

Although bullish sentiment has seen a pretty notable decline, the corresponding increase in bearish sentiment has not been as sharp.  In this week’s survey, bearish sentiment increased from 21.4% up to 24.03%, which is up less than nine percentage points from its recent lows.

Initial jobless claims saw their largest weekly increase since mid-December this week, rising from 216K up to 233K.  While the 17K increase may be relatively large, you have to keep in mind that last week’s reading was not only the lowest weekly print since the 1970s, but it was also revised lower from an originally reported 220K.  At some point, claims just can’t drop any lower.  With this week’s reading, claims have now been below 300K for 151 straight weeks!

Even as claims increased this week, the four-week moving average dropped by 3.5K down to 240K and barring big increases in weekly claims over the next two weeks, this reading should continue to drop as the next two weekly prints that will be falling off the count are 250K and 261K.  As it stands now, the current four-week average is 8.75K above the prior cycle low of 231.25K, but that level may actually come into play in the coming weeks.

On a non-seasonally adjusted (NSA) basis, this week’s report was the most impressive, though, as claims fell from 354.1K down to 262.3K.  That’s more than 159K below the average for the current week of the year since 2000, and to find a year where claims were lower at this time of year than they are now, you have to go all the way back to…forever!  Well, that’s not entirely accurate, but since the data for US jobless claims begins, NSA claims have never been lower for the current week of the year than they are now!

When the dollar is falling, US companies that generate most or all of their revenues outside of the US end up benefiting.  And ultimately that benefit works its way into share price performance.  Recent price action proves it.

As shown below, the US Dollar index is down 13.45% since its high from December 2016.

Using our International Revenues Database (available to Premium and Institutional members), we broke the Russell 1,000 into two groups.  One group contains stocks that generate more than 50% of their revenues outside of the US.  The other group contains stocks that generate less than 10% of their revenues outside of the US (or >90% of their revenues domestically).

We calculated the average performance of stocks in each basket over two time periods — since 12/28/16 when the dollar peaked, and since the start of 2018.

Given the dollar’s steep drop, you would expect to see the “international” basket do much better than the “domestic” basket, and that is exactly how things have played out.  As shown, the stocks that generate >50% of their revenues outside of the US are up 35.35% since the dollar peaked, and they’re up 7.3% year-to-date.  The stocks that generate less than 10% of their revenues outside of the US are up just 16.23% since the dollar peaked on 12/28/16, while they’re up just 3.62% year-to-date.  Over both time periods, the basket of “international” stocks has doubled the basket of “domestic” stocks.

Expect this trend to continue as long as the dollar is falling.  If the dollar puts in a bottom, though, you should see pretty dramatic rotation back into the “domestic” stocks.

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