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The US dollar (DX=F, DX-Y.NYB) is spiking as the S&P 500 (^GSPC) looks to erase its post–Liberation Day losses on news that a temporary tariff deal was made between China and the US.
UBS Asset Management portfolio manager and head of multi-asset strategy Evan Brown joins Catalysts to explain why he sees the US rebound as a chance for investors to start reallocating more internationally.
To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
Is the Buy America trade so bad already this morning?
Yeah, I think so. I mean, it's it's been coming back over the last few weeks as I think people have increasingly realized that these tariffs were unsustainable and and now we're actually getting the the policy action reflecting it. But I think this uh well, look, narratives swing very quickly in this market. We came into the year with peak US exceptionalism, then we almost went to America's uninvestable and uh and I think we're we're coming out of that swing. I think the the broad truth is that um foreign investors and US investors are probably over allocated to US assets. I mean, it's been been a big winner over over you know, 15 years essentially. And so over time, some more diversification makes sense. Um but it's not you know, we got to a point where the narrative got so stretched or like the US is not a US bonds are not a safe haven or US equities, you know, just completely down playing the the earning strength and the power of some of the mag 7. I think that just went too far. So what we're saying for investors is is kind of use this US rebound to, you know, over a structural period, be allocating a little bit more into into international.
Yeah, use the rebound to diversify if everything that happened after April 2nd made you sit a little sickly when you were looking at your portfolios. I am curious about the dollar and how you're thinking about whether or not stocks can fully recover state side without a bigger bounce in the dollar.
Yeah, so I I think uh the dollar will the dollar came down about 10% as part of this unwind of US exceptionalism trade. I think like what we're seeing today, we're going to see a bounce in the in in the dollar because uh you know, I think just the the narrative got too stretched and US is okay. US outperformance can resume for for some period. Now, the dollar's decline has actually been very helpful uh in supporting the outlook for US earnings, making it look a little bit a little bit better. So um we'll lose some of that tailwind for for US earnings, but um overall, I do think just like our our broad, you know, advice to to be reallocating more abroad. I think that the long-term trend again, as the dollar rises, you want to be allocating a little bit more into international as other currencies weaken.