Historically, when the U.S. dollar surges, forward S&P 500 earnings plummet. In the same vein, the last two times that the world’s reserve currency skyrocketed, the U.S. economy slipped into a recession.

Come on, Gary. Do you really think that we have already dipped into recession territory? No, I do not. Yet the idea that the Federal Reserve can permanently prevent an economy (or a stock market) from succumbing to cyclical forces is foolish. In fact, Federal Reserve Open Market Committee (FOMC) members now have to deal with byproducts of six-plus years of zero percent rate policy, including unfamiliar volatility in market-based securities as well as the impatient ascent of the greenback.

Indeed, chairperson Yellen faces a bigger challenge than whether or not to remove the word “patient” from Wednesday’s rate policy statement. The inexorable rise of the U.S. dollar has wreaked havoc on U.S. manufacturing output, future new orders as well as commodity prices. And we’re not just talking about oil prices here. Investors are abandoning virtually all of the commodities essential to healthy economic activity.

DBC Six Months

If the Fed misinterprets purportedly strong job growth and hikes overnight lending rates on several occasions in 2015, we won’t simply bear witness to a domestic slowdown. We will see outright contraction. It would happen because extraordinary dollar strength isn’t just the stuff of financial speculation; rather, it is the unfortunate reality of currency wars gone awry.

I continue to recommend exposure to less volatile U.S. stocks via Vanguard Dividend Growth (VIG), Vanguard Mid-Cap Value (VOE) and iShares USA Minimum Volatility (USMV). Increasingly volatile price movement can bee sen in virtually any exchange-traded basket. Nevertheless, funds like USMV are still holding above both the 100-day and 200-day moving averages. Higher-lows are also a positive indication.

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