Is the U.S. Dollar a Safe Haven?

A subscriber asked whether the U.S. dollar is a safe haven from the U.S. stock market. One way to address the question is to repeat the tests used in “Best Safe Haven ETF?” on Invesco DB US Dollar Index Bullish Fund (UUP). Specifically, we look at:

1. Contemporaneous UUP return correlation with the S&P 500 Index during all market conditions at daily and monthly frequencies.
2. UUP performance during S&P 500 Index bear markets as defined by the index being below its 10-month simple moving average (SMA10) at the end of the prior month.
3. UUP performance during S&P 500 Index bear markets as defined by the index being -20%, -15% or -10% below its most recent peak at the end of the prior month.

Using daily and monthly dividend-adjusted closing prices for UUP since inception in March 2007 and contemporaneous daily and monthly levels of the S&P 500 Index since June 2006, all through April 2022, we find that: (more…)