A lot’s changed since the beginning of the year.
We came into 2025 looking for a decline in the U.S. Dollar.
Positioning suggested this was the most likely outcome, with speculators betting very aggressively on a rising Dollar.
Commercial hedgers were extremely short.
Rather than simply shorting Dollar futures in January, we gamed-out the implications of a Dollar decline.
We figured areas like Gold and International equities would benefit
Boy, did they.
The Economist Is Doing Its Thing
Global equities, for example, outperformed U.S. stocks by the widest margin of all time in the first quarter.
The Dollar Collapse was epic, more aggressive than we ever imagined. And we were some of the biggest Dollar bears on the Street.
When an asset as big and as important as the U.S. Dollar completely collapses, it causes havoc all over the market.
But, in addition to the futures positioning, let’s remember what appeared in the fourth quarter of 2024, just before that Dollar Collapse
The Economist was telling you the U.S. was the envy of the world.
They had a wad of Benjamins shooting into outer space like a rocket ship.
The opposite happened. The Dollar fell apart, and U.S. stocks massively underperformed International equities.
The U.S. was the exact opposite of the envy of the world.
The U.S., in fact, was put into a position of having to play catch up.
Fast-forward to the second quarter, after the Dollar Collapse worked like a wrecking ball in this market.
The Economist came full circle: From “The Envy of the World” to “How a Dollar Crisis Would Unfold,” just like that…
You can’t make this stuff up.
This is real life, folks!
And, of course, the U.S. Dollar bottomed literally the very next day.
At this point, the U.S. Dollar is retesting those key lows from April in what could potentially be a historic double bottom in the U.S. Dollar.
Let’s Do the Opposite
Meanwhile, the news people are telling you Gold is the “new” risk-free asset, and that it’s no longer the U.S. Dollar.
This is the type of divergence we love to see, when the narrative is one thing but reality is another:
As it turns out, even the professional investors are listening to this nonsense.
According to the latest BofA Global Fund Manager Survey, professionals are the most underweight U.S. Dollars in more than 20 years:
That escalated quickly.
At the end of 2024, investors were betting on a rising Dollar. The opposite occurred, of course.
Now, investors are aggressively betting on a weaker Dollar.
My bet is the opposite occurs, once again.
So we bought more commodity stocks this week.
I think everybody’s wrong.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs