The dollar stagnation is eager to the stock market pain for foreign investors

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European investors in American stocks have been dealt with a double blow as slides in vehicle losses in dollars on stocks, and ending a “virtuous cycle” of stock prices and currency gains during the last Wall Street race.

The recession in the United States has linked this year a A widespread bet Wall Street will continue to excel. But the accompanying slide in the dollar has enlarged pain for foreign investors, as it ended a pattern in which currency gains tend to compensate for some declines.

The S& P 500 Blue Chip has decreased by approximately 4 percent in dollars so far this year, but more than 8 percent in the euro.

Analysts said this is the opposite of a self -enhancement cycle as European investors in American stocks helped to strengthen the dollar, improve revenue from unpleasant stock beta and encourage them to allocate more.

For the past two decades, the dollar has strengthened against its main peers, with the latest explosion of force at the end of last year.

“It is a virtuous cycle that you have long have and is now in the other direction,” said Peter Openheimer, the chief global stock strategy in Goldman Sachs.

“The US market fell more and because the dollar has decreased, when it translated it again, the effect is worse.”

In the last quarter of 2024, investors led the US shares to record their highest levels to optimistic technology and hopes for increasing the profits of companies from Donald Trump’s pledges to reduce taxes. S&P 2 percent rose in dollars, but approximately 10 percent in the euro.

But the dollar has been greatly reflected this year as investors collected their assumptions on the impact of Trump’s protectionist policies. In the past, investors expected us to enhance the highly inflationary trade tariffs and harm growth elsewhere, pushing the dollar up and euros towards equal with Greenback.

Since mid -January, the dollar was placed, taking into account investors from American economic growth, while Europe’s promises about increasing optimism in defense spending on the continent.

Some discover a deeper shift in how the assets are perceived in dollars. The dollar has been widely seen as a haven for stress, and often enhances when bad news strikes global stocks. This encouraged investors abroad to tension in Wall Street shares without pushing hedging from currency risks, because the dollar was tantamount to shock absorbers during the sale.

“The properties of risk reduction in the uncomplicated exposure to the dollar in allocating the wallet over the past decade,” said George Saravilus, an analyst, analyst at Deutsche Bank, adding that this is “change now.”

He said that the sale of the United States for this year led to similar losses to European investors, as did a deeper defeat in Wall Street in 2022, due to the changing role of the dollar.

If this “correlation collapses” continues between shares and the dollar, European investors may consider twice to load on American stocks without the currency hedge, according to Saravilus.

Some of them already turn. A little more than five European fund managers who respond to the Bank of America survey this month said that they are underweight in the United States, the highest percentage since mid -2013.

It can add the largest European immigration to the pressure on American stocks, which fell in the correction area earlier this month.

“The negative risks of the S&P 500 are the result of selling foreigners important,” said Apollo Torsten Slok, noting that the weight gain situation is that foreign investors have grew up in American stocks.