The Dollar Will Stay Strong.

That Spells More Pain for Companies as investors need only take a vacation this summer to understand the market exuberance back home.

In Europe, there is drought, wildfires and the cost of energy has soared. In China, residents and tourists are being caught up in shutdowns from a zero-tolerance policy toward fresh Covid-19 outbreaks.

The knock-on effect is stark. China’s economy is forecast to grow at the lowest level for more than 40 years. In the U.K., consumer confidence has sunk to a record low.

The safe-haven dollar is good news for travelers, buying 14% more on a London trip compared to a year ago and 16% more in Paris or Rome thanks to euro parity. The greenback won’t weaken soon, as rates continue tightening globally, delivering shocks to some economies such as Turkey. The U.S. Dollar Index, which had eased as investors bet on a slower pace of U.S. interest rate rises, is up 1.9% this week alone.

Federal Reserve minutes signaled there is more to do to tackle inflation. The variables are how fast and how high officials should go. Their job has been made harder as the S&P 500 has powered 17% higher from its mid-June nadir.

Confidence that the U.S. is doing better than the rest of the world comes despite some weak economic indicators, such as slow home sales. And it is worth noting the U.S. was the worst-performing of the major G-7 countries, the seven largest rich countries, in the second quarter, contracting by 0.2%.

Some market bulls think global recession fears are overblown and that inflation will clear up largely on its own.

But the strong dollar will still feed through to blue chips regardless. Analysts at Morgan Stanley wrote last month that the 16% jump in the dollar at the time implied a fall of about 8% in S&P 500 company earnings. Now that would be no holiday.

Saudi Arabia is on track for its fastest rate of economic expansion in nearly a decade. High oil prices will likely help the Kingdom to finish 2022 as one of the world's fastest growing economies, according to the International Monetary Fund.

In a new report, the IMF forecasted Saudi Arabia's GDP to increase by 7.6% this year, just two years after it shrank by 3.4% during the pandemic. 

"Saudi Arabia is likely to be one of the world's fastest-growing economies this year as sweeping pro-business reforms and a sharp rise in oil prices and production power recovery from a pandemic-induced recession," the IMF said Wednesday. 

Meanwhile, there's little domestically to suggest the US can get anywhere near that level of economic productivity for the year. 

Recession talk abounds and the Fed continues to struggle against inflation. The IMF predicts US inflation will average 6.6% through 2022 and drag into next year. Wednesday's forecast pegged US GDP at 2.3% for the year — less than half of last year's growth and far below that of the oil-rich Saudis.

European countries are faring even worse. The deepening energy crisis in Europe is set to spark a series of steep economic contractions, according to an analyst from Energy Aspects. On Thursday, benchmark prices for European natural gas continued to climb, and now sit roughly 10 times higher than usual for this time of year.

A severe heat wave, Russia's cuts to gas flows, and a period of drought for Germany's Rhine river have all contributed to a bleak outlook for the continent's economies.

And, all the while, Saudi Arabia is about to pen a huge growth milestone into its history books.

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