Lately, I've been really frustrated by currency risk. As a European investor, I've noticed that my dollar-denominated investments have lost value, even when nothing fundamentally justifies such a depreciation. It makes me question whether staying overly exposed to the American dollar is wise, especially when sudden shifts in the EUR/USD exchange rate can bite into my returns.
We’re witnessing market turbulence, with S&P 500 taking significant hits in just a couple of days. Meanwhile, the US government has made a surprising move by exempting smartphones, computers, and various tech components from the new tariffs aimed at China. This decision, coming mere days after the more aggressive tariffs came into effect, appears to serve two purposes: it shields large tech companies (many of which manufacture in China) and helps avert a further economic shock by preventing a surge in costs for both US businesses and consumers.
All of this feels like a modern-day "cold war" that isn’t solely fought on physical battlefields but also in the realms of trade and monetary policy. As the dollar continues to slide, leaving behind a trail of uncertainty, I find myself reevaluating my portfolio. Perhaps it’s time to further reduce my exposure to the US dollar to guard against these seemingly unwarranted currency swings, or not?
In the end, it isn’t just about the numbers, it’s about untangling the competing forces at work and protecting the financial foundation we've all worked so hard to build. The changes in the global economic and political climate leave us all with plenty to ponder. 🤔
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