Advisor can you spare a dollar outlook?
The US Dollar Index, best known at the DXY, is down about 4 percent year-to-date, hanging onto the 104 level. The index was closer to 90 a scant four years ago before the Federal Reserve started its streak of rate hikes which attracted dollar buyers worldwide, strengthening the greenback against rival currencies.
Most noticeably, it was three years ago this May when the DXY eclipsed that all-important 104 level for the first time in more than 20 years.
And it was probably about that time in the spring of 2022 when your neighbor told you they were taking the family on a dream vacation to Portugal that summer. Or maybe it was your brother-in-law telling you that he was going to Tokyo for business because the Yen was finally so cheap.
Seriously, it’s hard to remember all those foreign trips all your friends and relatives have taken in recent years due to the US dollar’s supremacy.
Still, what if the dollar’s recent stumble is only the beginning? If more rate cuts are indeed on the way, not to mention additional tariff worries and growth scares, then this might only be the start of the longer decline for the greenback.
And if that’s the potential case, what, if anything, should wealth managers be doing about it?
Sean Beznicki, director of investments at VLP Financial Advisors, said he closely monitors the strength of the U.S. dollar as a key economic indicator as it influences capital flows, investor confidence, and international returns.
“While the dollar has depreciated due to rate cut expectations, inflation, and global de-dollarization efforts, we believe it may strengthen in the near term given ongoing safe-haven demand, potential Fed policy shifts, and geopolitical uncertainties,” Beznicki said.
In terms of portfolio allocation, Beznicki factors in dollar trends when assessing currency exposure, particularly for international holdings, to manage return durability and risk.
“We will adjust our international portfolio allocation somewhat based on the strength or weakness of the dollar and the past 5 or so years we have been underweighted to international due to the strength of the dollar,” Beznicki said.
Elsewhere, Eric Amzalag, owner of Peak Financial Planning, points out that the weaker the dollar, the better the rest of the world does in "relative terms" against the US and specifically their asset markets.
“I do use the dollar as an indicator, generally because it is a good indicator of whether money will flow into or out of the US stock market,” Amzalag said. “The dollar has weakened in advance of the US stock market decline that has taken place this year. But it's very likely that as policy uncertainty is absorbed, the dollar will strengthen again, which will likely prop up the US stock market as money will flow back into the US.”
In terms of strategy, Amzalag generally decreases his exposure to the growth side of his equity sleeve as the dollar weakens. And as he anticipates the dollar getting stronger, he increases exposure to that growth side of his equity allocation.
Moving on, Tim Holland, chief investment officer at Orion, said he is not surprised to see the dollar on the back foot year-to-date considering the Trump Administration would prefer to see a weaker dollar in his opinion, along with concerns around policy uncertainty and persistent US government deficits.
And while as a rule he doesn’t forecast the US dollar, Holland will consider the potential impact of the dollar and its near-term performance on investor sentiment and corporate profitability, particularly as it concerns the potential for ex-US markets.
“We think a falling dollar has been a particular tailwind for ex-US markets year to date, and one reason why international developed and international emerging markets are, broadly speaking, outdistancing US stocks in 2025. Our team has become increasingly constructive on international stocks of late,” Holland said.
Finally, Spencer Knickerbocker, partner at Stonebrook Private, said he is forecasting continued strength in the US dollar, bolstered by his view that inflation will likely remain persistent. In his opinion, the Federal Reserve may be influenced to keep rates near 4 percent which he considers “still very attractive globally" and should continue to attract foreign investment.
In terms of the dollar’s impact on his portfolio allocations, Knickerbocker said he recently added to his overweight position in US stocks, using their sharp relative underperformance in 2025 as a buying opportunity.
“We believe the snapback in international developed markets relative to the US is overdone and not likely supported by fundamentals moving forward. In addition to trimming our international holdings, we have added a dollar-hedged position to international stocks further bolstering our bullish view on the US and the dollar,” Knickerbocker said.
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