How to Predict the Future

It’s time to sit down with clients in advance to proactively calm nerves anticipating increased volatility over the next few years, during a recalibration of world trade policies.

Let’s look at the U.S. Dollar Index (DXY), which is sometimes underappreciated by my Financial Advisor peers. It can reveal powerful insights about the global economy — and right now, it’s telling an interesting story.

I recently reviewed DXY, which tracks the strength of the U.S. Dollar against other major currencies. I looked at DXY charts across timeframes:
The DXY, measuring the U.S. Dollar, is weakening.

Year-to-date, it’s declined by about 8.5%, the worst YTD since 1989.

Over the long term (since the 1960s), the dollar has gradually weakened, down nearly 40% from its all-time highs.

When the dollar weakens over time, it has real-world consequences not the least of which is occasional wild market moves, which makes our Ideal Clients nervous…

U.S. exports become more competitive abroad, which can help narrow trade deficits, which is the stated goal of the current Trump administration.

But domestic inflation pressures can rise, as imports become more expensive.

Hard assets like gold, Bitcoin, and commodities are benefiting. Gold is up around 33% over the past 4 months, in reaction to rising treasury rates and increased uncertainty. So when equities dropped in reaction to the new trade and tariff policies, unexpectedly, Bonds went down and gold went up.

But then again the Scott Bessent, and the Trump team, have said for almost a year that the goal is to bring manufacturing back to America through a comprehensive rebalancing of the international economic system.

Investors are shifting capital away from U.S. dollar assets toward global alternatives. Unsettling.

It’s no coincidence that political leaders sometimes advocate for a weaker dollar to stimulate exports. In fact, Donald Trump has explicitly stated he prefers a weaker dollar to help U.S. manufacturers and reduce trade imbalances. Interestingly, while Trump’s tariffs and other policies sought to protect domestic industries, some of those same policies (and tax cuts) inadvertently strengthened the dollar due to increased global demand for U.S. assets. It’s a reminder that economic levers don’t always pull cleanly in one direction.

However, volatility picks up at times like this, making our clients nervous. The key takeaway for advisors: Dollar strength or weakness affects everything — especially market volatility.

With a dollar that has weakened for decades, help clients anticipate more market volatility in the future than they’re used to in the past. U.S. Bonds are becoming less of a “flight to safety,” creating uncertainty in bonds and equities.

At times like this, my industry trainers in the 1980s taught me, continually remind clients of the fundamental principles for long-term planning success.
1. Faith in the future is a requisite,
2. Patience is required,
3. Discipline avoids mistakes