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Citi Global Wealth overview | | 14 Investments FiGUre 6. DoLLAr reACHiNG HiSToriC eXTreMeS The US dollar may overshoot 140 In the coming environment, we look for an end to the US dollar’s mighty ascent. This period of strength has been its third such secular bull market since it began floating freely in 1971 – 130 FIGURE 6. However, there is a risk that it will overshoot, rising for longer than is justified by fundamental drivers. There are precedents for such an overshoot. 120 While the Fed began easing during the 1982 recession, the dollar continued rising sharply until 1985. And the currency’s strength persisted through much of 2002, despite the 2001 tech 110 bubble burst. The US experienced an asset bubble-induced recession in 2001. Despite sharp declines in real 100 interest rates and a dramatic drop in equity valuations during the period, the US dollar Dollar Index (Jan 2006 = 100) continued to rise through much of 2002. Given this, predicting a peak in the US dollar is 90 tricky. We feel confident in our view that US and global equities will find a bottom and US rates a peak. Nevertheless, present circumstances suggest a peak value for the dollar – and trough 80 values for major currencies – will be reached in 75 80 85 90 95 00 05 10 15 20 the coming year. This will have lasting positive implications for returns in non-US assets for Source: Haver, as of 30 Oct 2022. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes many investors for years to come. only and do not represent the performance of any specific investment. Past performance is no guarantee of future results. Real results may vary. Chart shows US dollar index between 1973 and 2022. Gray areas represent US recessions.

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