Navigating currency shifts and market dynamics: Insights from Denise Chisholm - February 5, 2026
Fidelity’s Director of Quantitative Market Strategy, Denise Chisholm, shared her insights on shared her insights on the evolving dynamics of the U.S. dollar, monetary policy, and sector performance, and what these mean for investors navigating today’s complex financial landscape.
Here are some of the key points from her commentary.
Rethinking U.S. dollar volatility
Denise Chisholm highlights the common narrative that dollar weakness signals economic trouble or equity market downturns. Historical data over the past decade shows that outside recessions, dollar weakness often aligns with stronger earnings growth and resilient equity performance. In fact, the stock market tends to rise about 90% of the time despite dollar weakness, suggesting that investors should consider the broader economic context rather than relying solely on currency movements as a market indicator.
Monetary Policy’s influence on equity growth
Earnings growth remains the primary driver of equity markets, largely independent of currency fluctuations. While the dollar’s valuation reflects supply and demand, relative yields, and growth differentials, these factors do not consistently predict equity performance. The Federal Reserve’s evolving approach, emphasizing debate, diverse viewpoints and risk management, plays a crucial role in shaping market trajectories. This adaptive policy framework helps investors anticipate moves and adjust strategies accordingly.
Emerging global currency trends: Gradual transition, not disruption
Despite discussions about a “new world order” and a shift away from the U.S. dollar as the global reserve currency, data indicates this transition is gradual. Net buying of U.S. Treasuries remains positive, and central banks’ increased gold purchases reflect diversification rather than outright dollar abandonment. This slow evolution allows corporate America to adapt strategically, maintaining profitability amid changing global financial dynamics.
Sector performance signals: Manufacturing recovery and economic nuances
Sector-specific trends reveal a nuanced economic environment. Manufacturing shows signs of recovery, supported by fiscal stimulus and Federal Reserve interest rate adjustments, with the ISM manufacturing index moving into expansionary territory for the first time in 36 months. Industrials are gaining favor over consumer discretionary sectors, reflecting pockets of strength amid broader economic disjointedness. Investors are advised to adopt a selective approach, focusing on sectors poised for growth and resilience.
Federal reserve leadership: Embracing flexibility
The nomination of Kevin Warsh as Federal Reserve chair signals a focus on credible policymaking and adaptive strategies. Warsh’s leadership style emphasizes transparency, debate, and flexibility, moving away from rigid forecasting. This approach suggests monetary policy may respond to real-time economic data, which is significant for investors seeking to navigate uncertainty with informed strategies.
Conclusion: Earnings growth and risk management
Currency movements, while important, do not singularly dictate market outcomes. Earnings growth remains central, supported by nuanced monetary policy and sector-specific dynamics. The gradual evolution of global currency preferences and the Federal Reserve’s adaptive approach create an environment where informed, risk-managed strategies can thrive. Investors should stay focused on long-term earnings trends, monitor Federal Reserve signals closely, and adopt a sector-focused investment approach that leverages emerging economic recovery signs to navigate volatility confidently and position portfolios for sustainable growth.
