The strongest dollar in 18 months: which side of the trade are you on?
A European investor holding U.S. stocks earned roughly 4% this autumn without the stocks moving at all. That same move is now starting to eat into the profits of the companies they hold. How can you tell which end of the trade is winning right now?
Key points
The dollar index is at its highest since April 2025, and a European investor has profited over the past month without the stocks moving.
PepsiCo raised its estimate of the currency contribution to +1.5%, but at the same time cut its constant-currency earnings growth to just 1 to 2%.
Third-quarter results are calculated with a dollar that no longer exists in the market.
A weak euro is dividing European portfolios into winners and losers of the same event.
Five concrete signals from the 1.11 level in EUR/USD to a single word in companies' 2027 outlooks.
Four percent that nobody sold you
The dollar index, which measures the dollar's strength against a basket of major currencies, is sitting at 102.4 points on October 8. That is its highest since April 2025, and it has gained 3.6% in just one month. The mirror image is the euro: on October 5 it fell as low as 1.116 dollars, its lowest since May 2025. Back in January it stood above 1.20 dollars.
For most people, that is a statistic from the economic news. But for anyone holding U.S. stocks or an S&P 500 ETF in their portfolio and calculating returns in euros, it is a real movement in their account. Imagine you held a U.S. ETF worth 10,000 dollars on September 8. If the fund's price hasn't moved a cent since then, in euros you now have about 4% more than you did then. Just because your dollars buy more euros.
That is the pleasant side of the trade. And precisely because of that, few people question it. But the same mechanism that marked up your portfolio is now working inside the companies whose stocks you hold in that portfolio. And there it is having the opposite effect.