Portfolio diversification and the US dollar

Are people concerned that they could lose all their gains, and some, if the dollar weakens.

The dollar is relatively strong at the moment but I can’t see this lasting:

Debt is spiralling out of control.

Inflation is rising.

And as I’ve said before China will overtake US gdp in the next decade. China can start demanding payments in Yuan. China has more than double US gold reserves.

Belt and road initiative has begun.

This is why is am very sceptical of US stocks…I feel the pound won’t take as much a hit where as the replacement of top dog china will have a more profound shake up on the US.

Let me know your thoughts.

I say there is no need to worry too much about it. All you need is good risk management strategies. You can’t worry about things you have no control over. No one knows what tomorrow holds and trying to guess would be futile. The dollar may lose value, it may get stronger or it can just stay the same, who knows. You just need to be aware of current affairs and be able to act accordingly.

Hmmm true Im just confident this is matter of when not if and the impact could be huge

Just know that whatever happens to the dollar they will never stop printing more of it to prop up their economy. So any doomsday scenario might not even occur in our lifetime :grin:

One important thing to note, China does not want its currency to be more valuable.

WTO and US complains about China intentionally devaluing their currency. https://www.bbc.co.uk/news/business-49245654

edit: on the same note: no country exporting more than they import wants their currency to become more valuable.

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I’m just more comfortable with the domestic market and the hedge from currency fluctuations. Sure these can impact the stock price but I don’t like buying at one rate and all my research and work has been outdone by a change in rates…maybe I’m overthinking

There was a decent discussion about this last week Buying U.S Stocks in £ - Weak Dollar

Might be interesting for you.

Dollar go’s up, pound go’s down yen is strong yen is week it is all within reasonable range from each other. Nevertheless I also was a bit worried since euro/dollar went from 1.07/1.10 tot the current 1.18 basically losing 0.08 per invested dollar since I’m in the euro. But in the financial crisis it has been 1.4 (cheap) and eventually crawled back up to a the 1.07 (expensive)

Fluctuations are to be expected, if you’re going long long-term or really short-term you probably shouldn’t worry. If you buyed beginning of the year and want to sell this year you should just hope the stock’s themselves will cover the exchange losses

Sounds like you have a good plan and it is always best to stick to it as long as it is working for you. Don’t expose yourself to unnecessary risk when you are already winning.

But surely as wealth rises china will start to import more and more…

I just feel with domestic stocks the companies do the hedging on your part (futures etc) and should shield you from currency fluctuations. I know I also have my own bias but I feel the UK will come out strong post Brexit.

I have my own bias but I think the UK will take a hit because of brexit and a year or 3 later it might be(come) stronger than it was.

But there’s this coronavirus-covid-19 situation first. I’m not sure if the UK is “in control”. (USA is worse).

Unfortunately most companies are global. Take the FTSE 100, most if not all are exposed to fx risks as well. Remember fx rates always fluctuate and they will never stay the same. So in the end it may not matter which market you are exposed to there will be times when your portfolio is up and down and as long as you are in no hurry to liquidate your stocks it should be fine.

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I agree with your statement but I think it will after year or three.

Very true, good point. Just fry your own brain thinking about all this.

China will import from whom? They already make everything in the world and for cheaper :roll_eyes:

Obviously a BRIC but not the C.

These countries are still largely untapped.

Who’s to say north Korea won’t ever open up too.

Obviously not short terms s until political reform. If it could replicate the South…

I’ve read the norwegian currency is very stable. They have no debt, not that I’m familiar with many Norwegian companies. The same can be said for Singapore.