Get Out of the US

If you only own US stocks, you are not diversified. In fact, you are totally screwed unless you do something about this right now.

Did you know that one of the top-performing asset classes last year was international small-cap value? I bet you didn’t. Overseas markets did well last year, and that news hasn’t trickled down to the individual investor.

My reasons for investing overseas are mostly technical, and not political. First, check out this chart of the dollar by Tavi Costa:

Source: Tavi Costa

The dollar is hard on trendline support against a basket of developed market currencies. I can tell you that the high in the dollar put in last spring was a massive sentiment top—bullish sentiment on the dollar was out of control, back when people thought that tariffs were bullish for the dollar. I disagreed, and now the dollar is 10% lower. It has consolidated for a while, and my prediction is that it will break support and enter a decade-long bear market.

Money has been flowing into US capital markets for almost two decades, into both stocks and bonds. Foreign capital flows have driven the dollar to unsustainable levels, unsustainable when you look at it from a purchasing power parity basis. If you’ve been to Europe or Japan lately, you know how cheap it is. My middle-class friends on Facebook from my hometown have been having extravagant holidays in Europe. You have probably heard about the protests in Spain, which have been totally overrun with tourists. This doesn’t happen if the dollar is cheap. During the last bout of dollar weakness we had, in the mid-2000s, I was working at Lehman Brothers, and Times Square was filled with fuzzy foreigners.

What Does Well in a Weak Dollar Environment?

The answer is foreign stocks, especially emerging markets, and commodities. What has done well in the last year? Foreign stocks, especially emerging markets, and commodities—and only the finance whiz kids are talking about this. Not your avuncular Edward Jones FA in South Carolina who is still stuffing his clients into 60/40 portfolios of American funds. I mean, yes, the avuncular FA, after a few years, will notice the difference in returns, start performance chasing, and put all his clients in after the easy money has been made. I am here to tell you that the easy money has not even been made yet. If the dollar returns to 2006 levels, those international holdings are going to look very good.

But all of this requires you to do something different, something that is out of the consensus. And the consensus in April of last year was that international stocks are dead forever, like, why do I have a 15% holding in this international fund? It doesn’t do anything. That’s where we were last April. 

I will give you a little insight into my portfolio. It is mostly gold, international, emerging markets, and commodities. I have some US stocks, but I am short them. That’s what I think about investing in the US right now. 

So, you probably saw all the drama at the World Economic Forum, and the Europeans are majorly pissed off at the US right now, and Canada is doing deals with China. The old rules of geopolitics are getting thrown out the window and will be replaced with—what? I’m not smart enough to figure that out. Actually, I am pretty smart, but I am deficient in geopolitics.

I just look at that chart of the dollar and know that all it takes is for someone to blow on it, and it is going to fall over. That is my opinion, but you don’t care what my opinion is, only what is in my portfolio. I just told you. Because opinions don’t mean much unless they are backed up by money (which is the whole point of Polymarket and Kalshi).

You get some guys in the financial markets who get sweaty palms when they talk about things like “the end of dollar hegemony.” My friend Brent Donnelly likes to make fun of these people, who are always predicting the demise of the dollar and the end of its reign as the world’s reserve currency. Nothing of the kind is going to happen. The dollar could weaken 30% and still be the world’s reserve currency. It could probably weaken more than that. People will still be transacting in dollars out of convenience, even if it is depreciated.

And a weaker dollar isn’t necessarily symbolic of anything. It doesn’t mean the US is going down the tubes. If the dollar did what the Argentine peso did, then yes, it would mean the US is going down the tubes. But a gradual depreciation to purchasing power parity levels would not be the end of the world, and one could make a lot of money off that trade.

So, in short, get some assets overseas. Stocks, yes; but also bonds and maybe even a house because, as Joaquin Andujar said, youneverknow.

Jared Dillian, MFA