Oppenheimer said a weakening US dollar, which is expected to weaken further, could mean it’s time for investors to look overseas for opportunities. The U.S. dollar has fallen significantly over the past year and was volatile just last month following escalating tensions between the U.S. and Europe over Greenland and President Donald Trump’s indifferent comments about the dollar’s decline. The ICE USD Index was at the bottom at 97.47, down 10% over the past year. Ari H. Wald, chief market technologist at Oppenheimer, predicts this means it’s time to “buy globally,” as emerging markets could benefit from a weaker dollar that could reduce debt burdens, with the added benefit of providing portfolio diversification for investors. “Global portfolios provide diversification because currency fluctuations reduce the correlation between U.S. assets and non-U.S. assets, but the diversification benefit decreases when currency exposures are hedged as correlations increase,” Wald wrote on Friday. He added: “If the dollar is weak, dollar-denominated global ETFs will benefit U.S. investors because strong currency constituents will be pushed back to a weaker dollar and emerging markets will benefit from lower debt costs and capital inflows.” He noted that two opportunities, the Europe ETF (VGK) and the Emerging Markets ETF (EEM), have breached their 2007 peaks, which is a bullish signal. Vanguard FTSE Europe ETF (VGK): The $31 billion ETF in the European stocks space is already up 5% this year and more than 30% over the past 12 months. Year-to-date, capital inflows have totaled just $243 million. iShares MSCI Emerging Markets ETF (EEM): The cap-weighted ETF with $27 billion in assets of emerging market companies is up 7% already this year and more than 38% over the past 12 months. Since the beginning of the year, it has already attracted $4 billion in inflows. EEM Year to Date Mountains EEM Year to Date Performance Indeed, last month, when the dollar fell along with U.S. stocks and bonds, Wald emphasized that global buying is not equivalent to a “selling America” trade as the dollar weakens. Indeed, the technologist remains positive on U.S. stocks, saying U.S. multinationals in particular have become “tactically attractive.” “We emphasize that buying the world is not the same as selling America,” Wald wrote. “The correlation between the dollar and U.S. stocks has changed over time, and we believe U.S. stocks continue to offer an attractive profile in year four of this cycle.”
