The US dollar
The global wrecking ball that is the US dollar is definitely looking expensive again.
The challenge is working out expensive relative to what, and why, and how you get exposure to them.
We think the euro, yen, and EM currencies are fairly cheap, as are their local equity markets. That’s the point of that last bit in the above paragraph; it’s easy to say “yen is low”, but are you buying JGBs, or the Nikkei, and are you buying the hedged or unhedged products?
With the dollar, the S&P 500 has fallen quite a bit in the local currency, and, given the AUD has lost so much more, unhedged funds have done quite a bit better. At some point, the super strong dollar will weigh heavily on US corporate profits, so we see good odds that both hedged and unhedged funds will roll over further.
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Please note that past performance is not a reliable indicator of future performance.
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