WSJ Your Money Briefing How the Strength of the U.S. Dollar Impacts Your Investment Portfolio
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Jun 17, 2025 Derek Horstmeyer, a finance professor at George Mason University, unpacks the implications of the declining U.S. dollar for investors. He explains how certain stocks thrive amid a weak dollar while others suffer. The conversation delves into investment strategies for diverse market conditions, including the benefits of international and U.S. small-cap stocks. Derek also discusses the bond market's resilience when the dollar falters, emphasizing the importance of maintaining a steady investment approach during turbulent times.
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Dollar Weakness Benefits International Stocks
- When the U.S. dollar weakens, international stocks generally perform better due to currency exchange effects.
- This happens because foreign earnings converted into a weaker dollar are worth more in U.S. dollar terms.
Invest in International ETFs if Dollar Falls
- Investors concerned about a falling dollar should consider international stock ETFs.
- These ETFs typically perform about 2.5% better when the dollar declines in value.
Favor US Small Caps if Dollar Rises
- If you expect the dollar to strengthen, favor U.S. small-cap stocks that generate revenue domestically.
- These companies benefit the most from a stronger dollar.