The U.S. stock market has enjoyed a strong rally since the early spring, but while the economy has shown improvement, it still faces major headwinds. So it may be best to hedge against the U.S. dollar, which is likely to experience a significant decline over the next few months.

The week begins with a bang, according to the Financial Times. The FT reports that, “The Obama administration is gearing up for a ‘big bang’ announcement within the next two weeks that will combine a bank clean-up with measures to reduce home foreclosures and probably steps to kick-start credit markets.”

Think about Michigan or about Ohio’s Mahoning Valley in the 1980s. Both were famous for industries that were world leaders in their time. Yet, once those industries decayed, large parts of both areas became wastelands of home foreclosures, crime and alcoholism.

The U.S. Federal Reserve and Treasury Department announced yesterday (Tuesday) $800 billion worth of stimulus measures to rev up three primary engines of the U.S. economy – homebuyers, consumers and small businesses.

Fannie Mae (FNM) and Freddie Mac (FRE), the mortgage giants taken over by the federal government back in September, will lower monthly payments for hundreds of thousands of struggling U.S. homeowners as part of a plan to accelerate anti-foreclosure efforts, federal officials announced yesterday (Tuesday).

It was January 1934. The Great Depression was five years old – but still had another five years to run.
The carnage was horrific: From 1929 to 1934, U.S. personal income plunged 44%, real output nosedived 30% and the unemployment rate soared to 25% of the American labor force.

It’s panic time for U.S. legislators, regulators, banks and lenders. More than $24 billion worth of adjustable-rate mortgages (ARMs) are expected to “re-set” to higher interest rates in November – boosting the likelihood of further home foreclosures.

There’s more bad news ahead for the U.S. economy as home foreclosures continue to rise. One out of every 483 U.S. households is at some stage of the foreclosure process, and with that many displaced or struggling homeowners, the economic recovery may well take longer than expected.

Foreclosure filings hit an all-time high with a 65% year-over-year increase in April and a 4% increase from March, RealtyTrac reported yesterday (Wednesday).

In the currency market, the dollar slipped some more against the euro. Late Tuesday, the euro was trading at $1.5525 vs. $1.5491 on Monday.