UPDATE: The US dollar’s prolonged strength has officially reversed in 2025, prompting urgent investment shifts amid growing concerns over the US economy. Following President Donald Trump’s announcement of the highest tariffs in over a century this past April, investor skepticism has surged, impacting the dollar’s value and causing significant market selloffs.
In the wake of these developments, experts stress the importance of diversifying portfolios beyond US assets. The substantial selloff immediately following Trump’s tariff declaration revealed how heavily portfolios were weighted in US investments, thanks to a decade of dollar strength. This situation has raised alarms about the potential risks for investors who may now be overexposed to US assets.
Recent data shows that while the global-bond category has historically underperformed, it has emerged as the third-best performing fixed-income category in 2025, achieving an impressive 8.7% annualized gain through October. In stark contrast, its US dollar-hedged counterpart only managed a 4.9% annualized gain, highlighting a shift in market dynamics that investors cannot afford to ignore.
Investors are now looking to funds with unhedged, non-US fixed-income allocations, such as the BrandywineGlobal Global Opportunities Bond (GOBIX). This fund, rated Bronze by Morningstar, has a variable non-US dollar exposure ranging from 50% to 100% of its portfolio. It targets countries with low debt levels and strong economic fundamentals, offering a 5.8% SEC yield, which ranks fifth highest in its category.
Another noteworthy option is the Dodge & Cox Global Bond (DODLX), recognized for its disciplined valuation strategy and long-term focus. While it maintains a more conservative non-US dollar exposure of around 20% to 25%, it still provides a competitive 4.7% SEC yield, placing it in the top quintile among global-bond funds.
As the market continues to adjust, the potential for higher yields in non-US fixed-income investments is becoming increasingly appealing. However, with these opportunities come inherent risks, especially in emerging markets. Investors are urged to carefully consider their asset allocations and to remain vigilant as these market dynamics evolve.
In a climate of uncertainty, the shift away from the US dollar could redefine global investment strategies. As we move through October 2025, all eyes will be on how these changes unfold and what they mean for both seasoned investors and those new to the market.
Stay tuned for more updates as this situation develops, and consider revisiting your investment strategy to optimize for these significant market shifts.
