The US dollar is likely to be entered in a long-term downtrend due to present political, and economic landscape which indicates a weaker dollar, as per a Jeffries report.
According to the investment banking and financial services major’s report in December 24, 2024, the U.S entered an all-time high of 67.2 per cent share in the MSCI All Country World Index. This occurred during a time when optimism prevailed around the United States’ continued remarkableness.
The New-York headquartered firm noted that this level was already close to breaking out on the charts, and finally the breakout has finally happened.
Further, the report clarified that this does not translate to the US stock market collapse. The crux of what’s occurring is the US holding 67 per cent of the index, which is usually considered high.
This proves to be quite significant as the U.S is credited for 26 per cent of the present global economy in terms of nominal GDP in US dollar terms and just 14.9 per cent based on purchasing power parity.
While even considering the massive-scale influence of the U.S tech giants, the number still seems inflated. This large gap is indicative of how the U.S dollar is on a long-term downward spiral.
Even when taking into account the large global presence of American tech companies, the number still seems inflated. This large gap suggests that the US dollar is now on a long-term downward path.
Jefferies said “There are several reasons to bet on a weaker dollar. One not unimportant one is that Donald Trump himself wants a weaker dollar”.
One reason to expect a weaker dollar, according to Jefferies, is that US President Donald Trump. The report stated that his unpredictable style of governance and frequent policy changes, especially on tariffs, create uncertainty in the market.
This kind of unpredictability can result in a natural discount on the dollar’s value.
However, the most pertinent reason the report mentioned, is the worsening financial condition of the U.S after Covid-19 induced pandemic. The Federal Reserve’s generous policies have added to this problem.
