Over the last couple of weeks, Nomura’s Charlie McElligott has variously suggested that when it comes to U.S. equities strength in general and a resumption of Growth/Momentum outperformance in particular, markets could see “more cowbell” (so to speak) in September.

After underperforming handily from July thanks in part to Facebook’s plunge, the ensuing correction in FANG+ and a squeeze in the most shorted names, the consensus U.S. equities fund strategy started to “work” again midway through last month around the same time benchmarks summited new peaks on Wall Street. That, of course, coincided with the dollar taking a break from an ascent that started in April.

In addition to the “consensus” strategy starting to work again, it’s also entirely possible that the buy-side will need to play catch up to the rally because, well, because this doesn’t look great if you’re charging people some derivation of “2 and 20”:

(Bloomberg) 

If what’s worked for hedge funds starts working again and managers start trying to increase exposure to play catch up, it could fuel further strength in U.S. stocks contingent, again, on the dollar not resuming its rally with the effect of tightening financial conditions and throwing everyone from New York to London to Hong Kong for a loop.

Generally speaking, all of that is consistent with the notion that from here, U.S. equities strength is going to be at least partially beholden to the dollar. All year long, U.S. stocks have remained resilient to turmoil abroad, leading directly to a historic divergence with the rest of the world. The explanation for that is simple: U.S. fiscal policy was simultaneously dollar positive and U.S. equities positive.

Long story short, markets seem to have reached something of a breaking point with that in early August as folks started to question how much longer U.S. equities could ignore weakness in ex-U.S. assets. What was needed was a bit of dollar weakness to buoy emerging markets in order to avoid a scenario where an outright EM meltdown boomeranged back stateside – or so goes the narrative.