Is dollar weakness a panic signal or healthy rebalancing?
My latest opinion piece for Reuters is available online. I wrote it as the US dollar started to drop and since then, the chatter about a loss of trust in the US dollar has become the main focus among economists and sophisticated investors. There is indeed a risk that what we are seeing is a broad-based loss of confidence in the dollar, but I argue that it could also simply be the start of a multi-year rebalancing of investor portfolios. When you look at ETF flows, it certainly looks a lot like the latter, not the former.
Is dollar weakness a panic signal or healthy rebalancing? Klement
April 14 - One of the biggest surprises since Donald Trump’s "Liberation Day" tariff announcement has been the continued weakness of the U.S. dollar, which is raising fears about an emerging market-style crisis brewing in the world’s largest economy. But what we’re likely witnessing is a healthy rebalancing of global capital.
Read the full piece here: https://www.reuters.com/markets/currencies/is-dollar-weakness-panic-signal-or-healthy-rebalancing-klement-2025-04-14/
Good news: Klement on Investing has looked at economic history, including the tech bubble burst of 2000, to point out lessons for today's markets.
Bad news: I am now so old that events which happened in my adult life, and seem like only yesterday, are part of history.
Great article and I would tend to agree with your conclusion. This idea of portfolio rebalancing away from US equities for several years could have profound consequences for the years to come. Investors need to deepen their knowledge of EU and Asian markets to find the right companies and trends to complement their US exposure, something I try to help with.