The US dollar has declined by 10% year-to-date, as measured by the US dollar index (DXY), due to uncertainty surrounding President Trump’s tariff announcements in April. This has led to a bearish consensus towards US assets, with many investors rethinking their US exposure. However, according to Standard Chartered Bank’s global chief investment officer Steve Brice, this consensus could lead to a short-term “melt up” in US assets as investors reposition. Brice believes that the market is “massively underweight” the dollar and US assets, and that a correction in positioning could lead to a surge in US assets.
For investors looking to hedge against a continued decline in the US dollar, Brice suggests investing in assets, including US assets, as a counterintuitive approach. He argues that dollar weakness is generally good for assets, including both equities and bonds, and that investing in these assets can be a great way to hedge against dollar weakness. This approach includes investing in US assets, as well as non-US assets, which have historically outperformed US assets in a weak dollar environment.
Meanwhile, wealth management clients are becoming more open-minded about diversifying away from their US exposure. According to Bank of Singapore’s global chief investment officer Jean Chia, diversification has finally started to resonate with the bank’s wealth management clients. Chia notes that many clients have been hesitant to diversify out of their US assets, which had been outperforming, but are now more willing to consider alternative currencies, such as the euro, yen, or Singapore dollar. This shift towards diversification is driven by the recognition that it is not a binary decision between the US dollar and their home currency, but rather a consideration of multiple currencies and asset classes.
Overall, the decline of the US dollar has led to a re-evaluation of US assets and a recognition of the importance of diversification. As investors look to navigate the current market environment, they are considering alternative approaches, such as investing in assets to hedge against dollar weakness, and diversifying their portfolios to include multiple currencies and asset classes.