The US dollar is in decline after a strong decade and, as the investment environment shifts, global investors now need to consider re-evaluating their portfolios, warns the CEO and Founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.
Nigel Green of deVere Group is one of a growing number of expert voices saying the US currency is set to weaken.
Among forecasters surveyed by Bloomberg, the median projection is for the dollar to fall against every other major currency this year.
He says: “Since 2011, the dollar has been on a relentless tear. The greenback’s bull cycle impacted almost every asset class on a global level.
“It was ramped up further over the last 12 months and hit generational highs. This was due to sharply and quickly increasing interest rates in the US – way ahead of other central banks around the world – and heightening geopolitical tensions triggered a flight to the safety and liquidity of the dollar.
The deVere CEO continues: “But many of the drivers that have pushed the dollar seem to be coming to an end.
“Other central banks around the world are now catching up with the Federal Reserve’s more aggressive interest rate hike agenda. Simultaneously, it appears that the Fed will begin to unwind its hiking program over the next few quarters.
“In addition, the US debt ceiling crisis underscores the scale of the nation’s enormous budget deficits.
“It appears we’re in a transition phase: from a bull to a bear cycle for the US dollar. This will shift the global investment environment in a profound way.”
Stock markets outside the US, particularly those in emerging markets, typically perform well when the dollar is weaker, says Nigel Green.
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He adds that U.S. large caps and multinationals are also likely to do well as much of their profits are generated in countries where the currencies are becoming stronger.
Sectors that can be expected to do well with a weaker greenback include energy and industrial commodities because they are traded in dollars and, therefore, as the dollar declines, they become less expensive for non-US-based buyers.
Tech should also do relatively well as much of the revenue also comes from outside the United States.
Nigel Green concludes: “The dollar’s decade-long rally is coming to an end and this is going to impact global investors, who should now be re-evaluating their portfolios to seize the opportunities in a new cycle.”