Investors should consider increasing international and emerging-market equity allocations along with commodities holdings as evidence suggests the dollar bull cycle of the past few years is dead, Wells Fargo Analyst Austin Pickle said in a note to clients on Tuesday.
US dollar-denominated allocations and emerging-market equities are two of the simplest and most effective ways to insulate a portfolio from a declining dollar, he said. Commodities, especially gold, are another way to successfully hedge against dollar weakness, though the bank isn’t optimistic on the near-term outlook for the precious metal.
Still, a declining dollar isn’t new, Pickle said.
“The dollar’s value has been trending steadily lower for the past 50 years,” he said. “The significant US dollar appreciation that occurred from the financial crisis to 2016 was actually the exception and not the norm. In fact, the dollar has experienced only three such periods of sustained appreciation that have interrupted the historical depreciation trend. And now, the rising tide that had lifted the dollar since the financial crisis seems to be going out.”
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