Sell The Dollar For Everything Else

Sell The Dollar For Everything Else

As the global economic recovery gathers strength, money managers are advising to sell the dollar and put that money into alternative assets like gold and emerging-market stocks, according to an article in Bloomberg.

K2 Asset Management is recommending trading the dollar for European stocks and Asian emerging bonds, and Brandywine Global Investment Management is buying up commodity-linked currencies, the article reports. Strategists at those companies believe the dollar has reached its peak and, as global growth improves, it will continue to weaken.

The dollar fell about 0.1% in the first week in January, the worst 3-day run since May 2021 for the Bloomberg Dollar Index. “[I]n hindsight it really only rallied last year because the Fed was ahead of the Bank of Japan and European Central Bank in tightening,” contends Peter Boockvar, CIO at Bleakley, who is picking gold and silver as alternatives. And as more opportunities abound across sovereign bonds, credit and stocks from emerging markets, the dollar will likely keep weakening, especially as traders factor in the looming interest rate hikes from the Fed.

However, some traders aren’t ready to write off the dollar just yet. “[M]arkets don’t move in straight lines,” says Ilya Spivak, head of greater Asia for DailyFX, adding that the greenback still looks constructive throughout the rest of 2022. And hedge funds have even increased their aggregate long positions on the dollar against a basket of eight other significant currencies in recent weeks, the article reports.

Still, as inflation rises and interest/discount rates increase in the developed world, emerging markets “is a good place to be,” says Rob Mumford, investment manager at GAM Hong Kong Ltd., in the article’s conclusion.