Goldman Sachs(US:GS) Hua Er Jie Jian Wen·2025-08-02 06:39Core Insights - The article discusses the ongoing depreciation of the US dollar, which has fallen 8% since early 2025, and predicts that this trend will continue, suggesting that hedging against dollar exchange rate risks is more effective than simply selling dollar-denominated assets [1][4]. Group 1: Dollar Depreciation Trends - Since early 2025, the dollar has depreciated by 10% against developed market currencies and 8% on a trade-weighted basis [1]. - Historical data shows that during periods of dollar weakness, asset performance can vary significantly, with US equities often rising but underperforming compared to overseas markets [2]. Group 2: Macro Drivers of Dollar Movement - Goldman Sachs identifies three main factors influencing dollar trends: "US growth," "US monetary policy," and "non-US/risk premium" [3]. - Concerns about US growth typically lead to simultaneous declines in the dollar and US equities, while dovish Fed policy expectations weaken the dollar and lower US yields [3]. Group 3: Investment Strategies - The report suggests that reducing exposure to US assets may be reasonable if the dollar continues to weaken, with emerging market assets likely to benefit [4]. - The analysis indicates that hedging against currency risks in US equities may be more compelling than reducing allocations to US stocks, as returns after hedging during dollar weakness periods have been comparable to global markets [4].