Trump's budget bill will sharply raise debt as a percentage of GDP, says Rebecca Patterson

Dollar Weakness Factors - The US debt-to-GDP ratio is projected to increase from 100% to potentially 125% or higher in the next decade, leading to increased Treasury issuance [2] - Higher borrowing costs, resulting from increased Treasury issuance, could slow down the US economy, making it less attractive for foreign capital and reducing dollar demand [3] - Current dollar weakness is primarily due to reallocation out of US assets by investors, differing from historical instances driven by Fed rate cuts [7] Impact of a Weaker Dollar - A weaker dollar can benefit multinational corporations and the stock market in the near term, but slower growth poses a long-term negative impact [4] - While historically a weaker dollar has correlated with faster earnings per share growth, the current situation is different due to the cause of the dollar's depreciation [6][7] - Excessive currency strengthening can create concerns for entities like the European Central Bank if the Euro strengthens to 120% [10] Global Investment Implications - Emerging markets may benefit from a weaker dollar, as investors potentially reduce capital allocation to the US [9] - Some countries, like Taiwan and Switzerland, are intervening to manage their currency strength, highlighting potential challenges [11] - Continued and rapid dollar weakness could lead to stresses in currency markets and potentially spill over to other asset classes, raising concerns about global instability [12]