Even as increased liquidity in Europe and the United States has boosted investors' outlook, sending stocks to four-year highs, the U.S. dollar has suffered. All the sectors of the S&P 500 have become much more sensitive to fluctuations in the value of the dollar over the last three years, but by looking at correlations, investors can see which sectors are most likely to benefit, according to Sam Stovall, chief equity strategist at S&P Capital IQ.

In the past 20 years, the correlation between stocks and the dollar has been negative, but only slightly so. Generally, the market is buffeted by a variety of factors, including investor confidence, earnings projections, energy prices and so on. Stocks are not generally dominated by one factor. "Yet recently, what we've found is the dollar has played a significant role in the direction of U.S. equities," said Stovall. "It signals risk on or risk off from a global perspective." He said when the dollar strengthens, it means investors are fearful of macro events and hide out in the safest currency on the globe: the U.S. dollar. When the dollar weakens, the all-clear signal has been given that it's safe to swim in riskier waters like the stock market.

In the last three years, correlations between the dollar and U.S. stocks have dropped sharply, according to Stovall. Today, seven sectors have rolling 36-month correlations under - 0.60. To put this in context, the 36-month rolling correlation since 1990 has averaged -0.19. (If the correlation between the dollar and U.S. stocks been -1.00, the two would have moved in exactly opposite directions. If it had been +1.00, it would have been meant they moved in tandem.) Two recent peaks in the correlation were in times of crisis: in August 1998 during the Russian debt crisis and in 2008 when credit markets were all but frozen, and stocks went into freefall. Stovall notes that US stocks plunged by 57% during that bear market, but the dollar still rose because investors were searching for a safe haven.

"So given that at least since 2008 the markets have been driven less by individual company specifics and more so by global macro factors, investors have been able to look to the altering value of the U.S. dollar to get an idea of whether global risk is on or off," he said.

So for now, the beneficiaries of a weaker dollar are the same as they have always been. International industries, including materials, energy and financials, are likely to get a boost from a cheaper greenbacks, which make their goods and services cheaper for global customers. More US-centric sectors, including telecoms, utilities and, to a lesser extent, consumer discretionary - including autos, homebuilding and retail - will get less of a boost from the falling dollar. At the same time, international stocks will likely benefit from the traditional pattern: if the dollar goes down by 5%, international stocks will generally climb by about 5%.

How long will the aberrant correlation between the dollar and stocks last? Hard to say, but Stovall guesses if the situation in Europe continues to be unresolved, and the American economy continues to recover at half-speed, and China continues to be a wild card in terms of a hard or soft landing, the negative correlation could continue for the intermediate term - the next year or so. That means a weakening dollar will continue to boost stocks both domestic and international. But he thinks over the long term the two asset classes will revert to their historical relationship.

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