Core Viewpoint - A significant shift in investment strategies is occurring, with a surge in funds flowing into "dollar-hedged" U.S. asset ETFs, surpassing "non-dollar-hedged" funds for the first time in a decade, indicating a potential $1 trillion wave of dollar hedging that could restore the hedging ratio of global investors' $30 trillion in U.S. equities and bonds to the average level of the past decade [1][3][6][7]. Group 1: Market Dynamics - International capital is continuously flowing into the U.S., pushing the holdings of U.S. Treasuries to a historical high while also pursuing rebounds in U.S. equities [2]. - Major Wall Street banks, including State Street, Deutsche Bank, and BNP Paribas, predict that the ongoing hedging activities will significantly pressure the dollar's performance in the coming year [3][9]. - The current hedging trend is characterized as a precise and subtle strategy termed "hedging America," which is becoming mainstream in global capital markets [5]. Group 2: Investor Behavior - As of April, foreign investors' hedging ratio for U.S. assets has stabilized around 56%, down from approximately 70% in mid-2023, indicating a shift in risk management strategies [11]. - A survey by Bank of America revealed that 38% of global fund managers are seeking to increase currency hedging to mitigate the risks associated with a weakening dollar, marking the highest level since June [12]. - Some large investors, including pension funds from Canada, Europe, and Australia, have signaled intentions to increase their holdings, reflecting a broader trend towards enhanced hedging [12]. Group 3: Strategic Insights - The analysis from Ninety One's Sahil Mahtani suggests that a slight adjustment in the current hedging practices could lead to approximately $1 trillion in dollar-selling foreign exchange transactions [6][11]. - Eleva Capital's Stephane Deo has already established hedging positions early in the year, anticipating a weaker dollar due to government policies, which aligns with the expectation of rising U.S. equities [13].