November 10, 2019

We present data suggesting a link between fiscal policy and other potential sources of real economic disturbances and the terms of trade. It documents the long-lasting real exchange rate cycle coinciding with the long relative returns cycles. The data also suggests that when the current dollar appreciation peaks and turns, there will be a long-lasting prolonged dollar decline. During that time international investing will outperform domestic investing. If the past is a guide, the mean reversion in the data points to several years of international outperformance and terms of trade decline.

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