UUP: Why It's Better To Reduce Dollar Exposure For Now

seekingalpha07-23

Constantinis/E+ via Getty Images Several factors suggest a high risk of dollar depreciation in the near future. Expectations of rate cuts by the Fed, the possibility of a Trump victory in the ...

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Expectations of rate cuts by the Fed, the possibility of a Trump victory in the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4705721-uup-why-its-better-to-reduce-dollar-exposure-for-now\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>UUP: Why It's Better To Reduce Dollar Exposure For Now</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUUP: Why It's Better To Reduce Dollar Exposure For Now\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-23 19:53 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4705721-uup-why-its-better-to-reduce-dollar-exposure-for-now><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Constantinis/E+ via Getty Images Several factors suggest a high risk of dollar depreciation in the near future. Expectations of rate cuts by the Fed, the possibility of a Trump victory in the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4705721-uup-why-its-better-to-reduce-dollar-exposure-for-now\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SPXU","symbol_name":"三倍做空标普500ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4705721-uup-why-its-better-to-reduce-dollar-exposure-for-now","article_id":"2453035373","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1875342136/image_1875342136.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2453035373","pubTimestamp":1721735602,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Constantinis/E+ via Getty Images Several factors suggest a high risk of dollar depreciation in the near future. Expectations of rate cuts by the Fed, the possibility of a Trump victory in the elections, and the bearish trend of the S&P 500 indicate a probable weakness of the dollar, with significant implications for global markets. Among these, a possible capital flight from the country's stock market and a relative appreciation of other thematic and geographic sectors have been neglected in recent times. In my opinion, it makes sense to reduce exposure to Invesco DB US Dollar Index Bullish Fund ETF  and stop purchases, with the intention of re-exposing the portfolio to the dollar at more opportune times. What to expect from U.S. interest rates?There's the most important question of the last decade: \"Will interest rates drop soon?The bookmakers. A fun fact: According to Odds Shark, Trump's odds have increased significantly, giving him a 72% chance of winning, particularly after a recen","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SPXU":"三倍做空标普500ETF","BK4588":"碎股","BK4550":"红杉资本持仓",".SPX":"S&P 500 Index","OEX":"标普100","VOO":"Vanguard标普500ETF","SPY":"标普500ETF","BK4581":"高盛持仓","BK4504":"桥水持仓","SDS":"两倍做空标普500ETF","UUP":"美元ETF-PowerShares DB","BK4585":"ETF&股票定投概念","UPRO":"三倍做多标普500ETF","BK4534":"瑞士信贷持仓","SH":"标普500反向ETF","IVV":"标普500指数ETF","OEF":"标普100指数ETF-iShares","SSO":"两倍做多标普500ETF","BK4559":"巴菲特持仓"},"translate_title":"UUP：为什么现在最好减少美元敞口","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"UUP":1,"US10Y.BOND":0.9,"US12M.BOND":0.9,"US2Y.BOND":0.9,"US30Y.BOND":0.9,"US7Y.BOND":0.9,"US6M.BOND":0.9,"US5Y.BOND":0.9,"US3Y.BOND":0.9,"VOO":0.73,"SPY":0.73,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6,"SSO":0.6,"UPRO":0.6,".SPX":0.6,"SPXU":0.6,"SH":0.6,"SDS":0.6,"OEX":0.6,"OEF":0.6,"IVV":0.6,"ESmain":0.6},"content_text":"Constantinis/E+ via Getty Images Several factors suggest a high risk of dollar depreciation in the near future. Expectations of rate cuts by the Fed, the possibility of a Trump victory in the elections, and the bearish trend of the S&P 500 indicate a probable weakness of the dollar, with significant implications for global markets. Among these, a possible capital flight from the country's stock market and a relative appreciation of other thematic and geographic sectors have been neglected in recent times. In my opinion, it makes sense to reduce exposure to Invesco DB US Dollar Index Bullish Fund ETF (NYSEARCA:UUP) and stop purchases, with the intention of re-exposing the portfolio to the dollar at more opportune times. What to expect from U.S. interest rates? There's the most important question of the last decade: \"Will interest rates drop soon?\" Naturally, we can't answer this definitively. At the same time, we can try to extrapolate some information from data. Looking at the CME FedWatch Tool, we don't see any rate cuts on the horizon. Let's be honest, the probability distribution can change at any time, as it has in the past. Currently, for the July 31 meeting, the probability of a 25 bp rate cut is around 2.6%, smaller than the probability from a month ago (around 10%). If we look at the FOMC meeting in September, things are changing: the probability of a 25 bp rate cut rises to 94%. Target Rate Probability (CME FedWatch Tool) So, is it certain the Fed will drop the interest rate in September? Absolutely not! But the Fed's days are numbered. According to this SPGlobal report, in the coming years, U.S. companies will face a substantial wave of debt maturities. Goldman Sachs has projected that approximately $790 billion of corporate debt will come due in 2024, followed by $1.07 trillion in 2025. To summarize, whether due to lower interest rates or an economic downturn, it is likely that the dollar's strength will decrease. The impact of a possible Trump victory in the U.S. elections A good analyst should usually look beyond political matters because it's challenging to estimate the real impact of \"gossip.\" Yes, I think politics is somewhat like a grand gossip; we can't truly know which political promises will become a nation's reality. However, the market is now trying to estimate the impact of the latest significant gossip: the Trump attempt and Biden's \"retirement plan.\" What could these events signify for the financial market? Probability becomes a great ally in this game. Do you know who is really good at calculating the probability of an event? The bookmakers. A fun fact: According to Odds Shark, Trump's odds have increased significantly, giving him a 72% chance of winning, particularly after a recent assassination attempt that may have galvanized his support base. At the same time, after the \"Biden retirement,\" the betting site PredictIt gives Harris about a 40% chance. Election Stats (PredictIt) What will be the impact of a Trump re-election on the financial market? Maybe we already know, but you might be surprised to learn that this may not be good news for the dollar. Exactly, Donald Trump is worried that a strong U.S. dollar might hurt the American economy. He believes that when the dollar is too strong, U.S. products become more expensive for people in other countries to buy. This could make American goods less competitive and harm the manufacturing sector. Donald Trump has frequently blamed President Joe Biden for having an administration that supports a strong dollar too much. And here lies the \"great paradox\": a weaker dollar could potentially improve the trade balance. However, it would also increase the cost of imports, contributing to domestic inflation. \"So, does this mean that the Fed will not decrease the interest rate?\" It could be. However, in this case, instability could disincentivize foreign investors, making investing in the United States less attractive, leading to a reduction in capital flows. So, I could be wrong, but I can't see a scenario where the dollar doesn't break the upward trend. The UPP: Ready for a New Capital Redistribution? I think there will be a geographic capital redistribution: when the downtrend of interest rates starts, the debt of emerging economies will become more attractive. This has happened in the past; for example, in 2000, when the Federal Reserve cut interest rates significantly from over 6% in 2001 to 1% by 2003, and similarly during the 2008 financial crisis. For a more in-depth understanding, I invite you to read this. You might say: \"Okay, but in all these cases the economy was in a crisis, and now there's no recession or anything like that.\" Yes, that's correct, but maybe we should remember what happened after the Fed rate instability of 2018. The UPP chart shows a downtrend that naturally started from the onset of the \"Covid crisis.\" Oops... another crisis in this case as well. Here is a discussion point for you: does it make sense to expect a sudden crisis coinciding with the first Fed rate cuts? Statistically, it seems likely. This consideration opens the door to another important question: \"Is the US stock market overvalued?\" If you think yes, then you might agree more than I do with the idea of a short-term dollar depreciation. In my opinion? I really don't know. I think it's really difficult to approach the US market with a value method. Looking at the history of the S&P 500, there has always been an alpha in North America, even where no one expects it, as usually happens in times of crisis What could go against my analysis? So yes, continuous growth in the stock market could invalidate my thesis. I mean, if the Fed succeeds in a \"soft landing,\" it's common opinion that the stock market will continue to grow. In my opinion, the soft landing is not a good reason to think that the UPP could continue to grow. There are many periods with UUP in a downtrend and the S&P 500 in an uptrend; I think that investors should focus on the Fed's interest rate cuts. UUP, S&P 500 (TradingView) At the same time, according to this PwC report, the U.S. financial market raised $736 billion in the first quarter of 2024, a 48% increase compared to the first quarter of 2023. In addition, the Department of the Treasury reported that foreign residents increased their holdings of long-term U.S. securities by $244 billion in June 2023. So, if interest rates go down, many capitals could flee from the USA. Conclusion  I know a title like \"Dollar Dead: Sell Immediately\" would have been more dramatic, but I want to clarify something: 'I remain bullish on the dollar in the long term, and I think a significant portion of a portfolio should be exposed to the US dollar.' However, I now expect some declines, so it might be smart to reduce exposure to this currency, with the intention of re-exposing at better times. If you hold UUP in your portfolio, it could be a good time to scale back your exposure. That's why I've given it a hold rating instead of buy; in short, I think it's not smart to keep buying dollars right now.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2453035373"}