Comment In the last few weeks, we have discussed how the interaction of a near-record US current account deficit funded via unhedged stock inflows could upend global equity allocations (“Long US Stocks and $: The End of US Exceptionalism” 7th Feb). We also examined how, if the outcome is a weaker dollar, then history suggests that not only are equity investors geographically vulnerable but also sectorally vulnerable: in the wrong US market sectors (“Equities: The Last Shall Be First” 15th Feb). The conclusion of this work was simple. We need to focus on new assets outside the US or, in the US, sectors that ideally will perform in a weak dollar environment. The only problem is we don’t know how the relative rotation will occur. The “nice” way, with the price of these new assets outperforming, or the “nasty” way, where everything sells off, but the new assets fall less.
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