A just-published report examined a number of timely investment issues and updated our absolute return positions in the MRB TradeBook. It also reiterated our view that the world will continue to migrate away from a sole reserve currency to more of a basket approach, causing the U.S. dollar to depreciate over the long haul.
This depreciation is likely to occur gradually, rather than abruptly. It is notable that non-U.S. risk assets (equities and EM debt) tend to perform better when the dollar is eroding, but few do well when the dollar swings dramatically. A weak dollar over time bolsters investor willingness to look for opportunities in other pro-growth markets to benefit from currency tailwinds. We expect a rotation out of the dollar and U.S. equities to gradually gain momentum once confidence in a synchronized global economic recovery improves.