tl;dr
Macroeconomics expert Raoul Pal warns that if the US dollar continues to weaken, risk assets like stocks and cryptocurrencies may experience significant growth. He explains that an improving business cycle increases disposable income and business investment, driving capital toward riskier assets, po...
Macroeconomics expert Raoul Pal warns that risk assets might witness significant eruptions if the US dollar continues to weaken. In a recent video, Pal shared with his 242,000 YouTube subscribers that a further decline in the US dollar index (DXY), alongside an improving business cycle, could lead to an extended bullish phase for stocks and cryptocurrencies.
Pal explains that when the business cycle picks up, disposable income rises and businesses invest more, which traditionally drives capital toward riskier assets. He suggests that the current business cycle could last longer than expected due to lingering post-Covid dislocations, potentially prolonging the uptrend.
Highlighting a critical threshold, Pal mentions that if the DXY falls below 90 — from its current level near 98 — it could trigger a full bubble cycle in risk assets. The DXY measures the dollar's strength against a basket of six major global currencies, and its weakening signals a shift in global financial dynamics.
Moreover, Pal points to increasing global liquidity as another bullish catalyst amid high government debt levels worldwide. He suggests that policymakers will likely boost liquidity to roll over existing debt, fueling asset price growth through an enhanced liquidity framework and looser financial conditions.
Overall, Pal’s analysis ties together macroeconomic cycles, currency valuation, and liquidity dynamics, painting a picture of a potentially robust rally for risk assets if the US dollar’s decline continues and financial conditions remain favorable.