Unloved USD

According to the latest BofA Global Fund Manager Survey, institutional investors are now the most underweight the US dollar in 20 years. The reasons are well understood: rising political uncertainty, persistent US twin deficits, and a growing shift by central banks away from the dollar as a reserve currency. Year-to-date, the USD has already lost 9.7% against the Euro.

At ECP, we grow cautious when a positioning becomes consensus. The more crowded the trade, the higher the risk of a reversal.

While historically Europe centric in our portfolios, we continue to invest in high-quality US companies. A weaker dollar boosts their global competitiveness, offering a natural hedge. And despite recent sentiment, the USD remains the world’s dominant reserve and trade currency.