Closer ties between the performance of U.S. stocks and the dollar may persist until the early stages of the next bear market for shares, according to Michael Shaoul, chief executive officer of Marketfield Asset Management LLC.

The CHART OF THE DAY displays an indicator that Shaoul cited in a note to clients yesterday: the correlation between the Standard & Poor’s 500 Index and the Dollar Index, based on average price swings during the last 200 weeks. The Dollar Index tracks the U.S. currency’s value against the euro, yen and four other major currencies.

Last week’s correlation was 0.6456, according to data compiled by Bloomberg. The figure was the highest since March 2001, about a year after an Internet-driven bull market peaked. Readings can be between 1 and minus 1, depending on whether two sets of data move in lockstep or in opposite directions.

“This, of course, makes sense,” Shaoul wrote. “The U.S. equity market is experiencing its highest degree of popularity amongst global investors since the end of the 1990s.”

The S&P 500 is poised for the kind of relationship with the Dollar Index that lasted through the late 1990s and early 2000s, the New York-based money manager wrote. Their 200-week correlation peaked at 0.9275 in October 1998, when a Russian debt default spurred demand for dollar-denominated assets.

Along the way, the dollar is bound to become less of a “safe haven” currency, the report said. Shaoul cited periods in 1998 and 1999 when the S&P 500 and the dollar both declined, magnifying losses for international investors.

To contact the reporter on this story: David Wilson in New York at [email protected]

To contact the editors responsible for this story: Chris Nagi at [email protected] Jeremy Herron, Jeff Sutherland