The Dollar Index: I’m growing anxious

As an over skeptic investor fearing the worst of our capital markets thanks to this year’s events, I had decided to shift my allocation to as close to cash as possible early on. As it turns out, and the reason I’m not a prominent financial advisor, this has been a mistake.

Along with a few other people, we have underestimated the Federal Reserve’s expansionary monetary policy's firepower. This has translated into an overall ~10% decline in the dollar value since March (2020).

I will purposely avoid talking about opinions on either candidate, political party, or political ideology and will solely comment on the above trend.

We’re seeing an expected and precipitous decline of the dollar's value caused in large part due to our continuous expansionary monetary policy that has been keeping our capital markets afloat for now.

Just as important is the world’s perception of the United States as a stable place to safeguard their capital.

The U.S will continue to be the best place to store your capital if and only if:

• We manage to maintain a stable political system. The uncertainty of the election cycle and the attack on our election process is not good for business.
• The talent imbalance continues to favor the U.S. Ever since WWII; the U.S has had the capital and the luxury to finance the ideas of some of the most ambitious and smartest people from all over the world. If the United States' perception gets damaged and the net inflow of “brilliant people” we have enjoyed for decades ends, we could be accelerating the end of the USD as a global reserve currency.