Investors face a global market reset when a negative US bet is destroyed
Investor confidence that US President Donald Trump’s tariffs and debt will trigger long -term pain for US dollars and shares to be destroyed, signifying pain ahead for assets throughout Europe and developing countries driven by this view.
The dollar is going to the first monthly profit this year, driven by strong economic data, concerns about the prospects of US assets and greater belief that the federal reserve may not cut interest rates again for some time.
With the euphoria of artificial intelligence that supports the US stock market to the daily peak of successively and endless greenback sales, European equity outperforms the performance has been jammed as an euro slide and the hot gold rally stall.
“This is one of the biggest positions possessed by people, being negative in the dollar and the US,” said Co-Head Asset Asset Asset from Multi-Aseset Shaniel Ramjee.
He is preparing to increase the exposure of the dollar from what he described as “practical zero”, with the hope that the US economic trend and company revenue will begin to exceed Europe.
The wide revival of the dollar, he added, might stop the trend of a large market 2025.
The so-called “residual world trade”, where investors prefer international assets rather than the US, led by rush to speculative betting to US currencies which have now slowed down, barclays analysis shows.
RETURN
European shares, which posted their best quarter relative to the US in three months to March, now only compensate for the S&P 500 SPX Wall Street because both indexes recorded an increase of around 8.4% from year to year.
Recently in mid-July, the belief that the dollar would weaken was the most crowded trade among global fund managers, the Bank of America Research showed.
But a currency trader who made a short -term bet on Greenback, who this year experienced the worst decline in the first half since 1973, is now retreating.
The Dxy dollar index is traded at the highest two months and is determined for an increase of 3% in July, the first monthly increase this year.
Euro, who scored the six best months in life 26 years in half a year until June, has dropped below $ 1.15, towards its biggest monthly decline since May 2023.
“We see rotation to the US equity, rotation in the currency market and rotation in the momentum (market),” said Head of Multi-Asset Asset De Rothschild Asset Michael Nizard.
He quoted the Sunday frame trading agreement between Washington and Brussels as the main reason for trends, which he did not expect to last until the end of the year, added that he would buy Euros around $ 1.14.
TEMPORARY?
Monica Defend, Head of Investment Institute at the largest asset manager in Europe Amundi, said he still held on the long -term view that the dollar would decrease due to Trump’s loan plans and attacks that were consistent with Federal Reserve independence.
But he said he was also ready to change his view “If growth in the US is surprising well above,” in a continuous trend from here.
Sterling GBPUSD has fallen 1.4% against Greenback this week and the developmental market equity index has drooped for three days as an amazing year-to-date rally kiosk. Gold gold, prominent trade in 2025, is heading for a successive defeat of the first three weeks since November, trading around $ 3,300 per ounce.
Amundi’s defense expects US technology shares and AI’s excitement to maintain Wall Street equity outperforms from here. But he also expects US growth to stop the tariff after the tariff starts to raise consumer prices.
“The US may continue to be extraordinary, maybe not in front of macro (economy), but rather in the equity market,” he said.
Nutshell asset management Cio Mark Ellis, a fund based in the UK changed his portfolio composition about twice a month, said he was not sure the boungers of the US headquarters could last more than next week.
For 50 years, August and September have been the worst month of S&P for returns compared to volatility, he said.
“Around the end of this week is the right time to take risk and I will be more defensive to enter the volatility and weakness of historical summer,” he said.
Head of European Equity Strategy Barclays Emmanuel Cau, in the July 30 record for clients, issued a different warning.
He noted that a hedging fund that follows the trend called CTA, whose trading is seen as a barometer of the dominant market atmosphere, has closed the bet on the US treasury and cut the exposure of European shares.
The more persistent dollars, he said, will be a “main pain trade” for global investors from here.
Source: Reuters
