Gimme Shelter: The U.S. Dollar Trade And It's Risks

Gimme Shelter: The U.S. Dollar Trade And It's Risks by Michele Mazzoleni, Research Affiliates

The resurgence of the U.S. dollar has been one of the leading investment stories of the last few quarters. A somewhat modest recovery in the United States has galvanized investors, who appear to believe once again in the currency version of the American dream. In contrast, headlines about the Eurozone malaise, the failed jump-start of the Japanese economy, and slowing growth in the emerging markets vindicate further depreciation in their respective currencies. No wonder strategists are forecasting further appreciation of the dollar (Ramage, 2015).

The comeback of the dollar appears very reasonable if based on a narrative about macroeconomic fundamentals. However, this narrative only partially...