I believe he is talking about "US assets" as in, referring to Tresuries, not equities. I was confused too, then realised. You're right in saying weaker USD will attract private foreign investment in growth sectors
A weaker dollar is generally good for US equities, but it depends why and if US equities experience large outflows. It's VERY good for ex US equities, especially emerging markets (look at Latin America or China the past year).
Hey Quinn, good piece, and I agree this is being massively overlooked - though flows are moving and frontrunning this, especially in smaller markets like commodities.
We may be seeing something close to a soft Plaza accord, at least with JPY and KRW (have a look at that chart too and tell me there was no intervention!), as the US tries to shrink its current account deficit and rebalance away from defacto global reserve, which has been good for asset holders but horrible for Middle America and US industry.
This matters hugely because the premium valuations of US asset prices (be it US stocks which dominate global indices or US treasuries not blowing) is a direct response of the current account deficit, and those flows being recycled back into the US, which has caused a huge negative net international investment position that leaves US assets vulnerable.
Trump said the main part out last year (main streets turn now), but the timing was not great and the bond market revolted. Everyone thought he'd completely TACO'd with DOGE, but the truth is he has to go down this route to confront China. Now they seem more confident, especially if they can get a favourable Fed chair. At the same time a weaker dollar / global reflation would allow them to run it hot, and structurally higher inflation is needed for financial repression.
For asset allocators, DXY breaking a 15 yr uptrend is huge, and comes at a time when emerging markets, commodities, value etc, which have all been left in the mud for 15 years, show signs of finally breaking out. Allocators are very underweight these assets, and these regimes often go on for much longer than expected! I think H2 2025 and January 2026 are a forerunner of things to come...
Good writeup. Would not touch the long end with a 10-foot pole. Gold and PMs already showing a bit of a pullback. Maybe we rotate into MAG7 laggards and go up for a few more weeks? Given the large speculator longs in BTC and ETH might see more pain to the downside before we go back up
I'm confused. Isn't a weaker dollar bullish for US assets?
I believe he is talking about "US assets" as in, referring to Tresuries, not equities. I was confused too, then realised. You're right in saying weaker USD will attract private foreign investment in growth sectors
A weaker dollar is generally good for US equities, but it depends why and if US equities experience large outflows. It's VERY good for ex US equities, especially emerging markets (look at Latin America or China the past year).
Hey Quinn, good piece, and I agree this is being massively overlooked - though flows are moving and frontrunning this, especially in smaller markets like commodities.
We may be seeing something close to a soft Plaza accord, at least with JPY and KRW (have a look at that chart too and tell me there was no intervention!), as the US tries to shrink its current account deficit and rebalance away from defacto global reserve, which has been good for asset holders but horrible for Middle America and US industry.
This matters hugely because the premium valuations of US asset prices (be it US stocks which dominate global indices or US treasuries not blowing) is a direct response of the current account deficit, and those flows being recycled back into the US, which has caused a huge negative net international investment position that leaves US assets vulnerable.
Trump said the main part out last year (main streets turn now), but the timing was not great and the bond market revolted. Everyone thought he'd completely TACO'd with DOGE, but the truth is he has to go down this route to confront China. Now they seem more confident, especially if they can get a favourable Fed chair. At the same time a weaker dollar / global reflation would allow them to run it hot, and structurally higher inflation is needed for financial repression.
For asset allocators, DXY breaking a 15 yr uptrend is huge, and comes at a time when emerging markets, commodities, value etc, which have all been left in the mud for 15 years, show signs of finally breaking out. Allocators are very underweight these assets, and these regimes often go on for much longer than expected! I think H2 2025 and January 2026 are a forerunner of things to come...
Good writeup. Would not touch the long end with a 10-foot pole. Gold and PMs already showing a bit of a pullback. Maybe we rotate into MAG7 laggards and go up for a few more weeks? Given the large speculator longs in BTC and ETH might see more pain to the downside before we go back up