1Mo·

"Concerns" about the U.S. dollar...

Hello to all (Swiss) investors

The title really says it all: For some time now, the topic of the USD has been on my mind more and more—and I just can’t seem to stop thinking about it.

Between the persistently strong Swiss franc and a dollar that has been in rather weak shape for months, I’m asking myself more and more often the fundamental question of whether it still makes sense for me, as a Swiss investor, to remain so heavily invested in individual U.S. stocks.

Specifically, I’m considering significantly reducing my positions in U.S. companies and reallocating the freed-up portion increasingly into CHF-denominated securities. The trigger for these considerations is relatively simple and can be well illustrated by one of my portfolio positions: My $O (-0,59 %) shares (Realty Income) show a gain of about 10% in USD in the app—at first glance, a solid result. But when I factor in currency fluctuations, the picture looks quite different: The bottom line is that I’m actually in the red with this position right now. The price gain is thus completely offset by the exchange rate loss—and I’ve only been invested in this company for a year.

To be honest, this is becoming increasingly frustrating. If this trend continues, I’ll have to ask myself how much sense it even makes to actively build or expand my portfolio of individual U.S. stocks if a large portion of the operating gains is wiped out by currency fluctuations. After all, you’re not just investing in a company, but—whether you like it or not—also in its home currency at the same time. And it’s precisely this second part of the equation that’s currently throwing a wrench in my plans.

One notable exception in my portfolio right now is $AAPL (-1,02 %) . Despite the unfavorable currency movements, I’m up over 40% here, which shows that truly strong operating performance by the company can certainly more than offset the currency effect. That at least gives me some hope that investing in U.S. stocks isn’t pointless per se—as long as you’re truly confident in the companies and their fundamental strength.

Still, I’m left with an uneasy feeling. That’s why I’d be very interested in your take on the USD: How do you see the current situation? Do you think the dollar can recover in the medium term, or do you expect the weakness to continue? And more generally: Do you think the USD and CHF will converge somewhat again in the long term, or do we, as Swiss investors, simply have to come to terms with a structurally weaker dollar for the long haul?

I’m eager to hear your opinions and experiences—especially from those of you who are considering similar weightings between U.S. and Swiss securities in your own portfolios.

12 Commentaires

GeldGenie@GeldGenie

1Mo

In short, because time is running out:
- The USD won’t recover
- Bravus Research on YouTube—just posted a great video on debt and currency dominance/cycles
- The currency “doesn’t matter”; companies and their currency exposure are much more relevant—and even there, you can
hardly
escape the USD.
-Conclusion:
> Avoid “safe bets” in USD or give them very low weight—the risk-reward ratio just isn’t good.
> If the USD falls, everything will be shaken up—until a new reserve currency establishes itself. However, none of this has any (direct) impact on corporate performance per se.
> My approach: Currently, primarily reinvesting dividends; slowly building up a capital buffer for a black swan event (collapse of the USD bond market in the next 1–5 years)

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Olli@Olli68

1Mo

It doesn't matter whether a company is U.S.-based or not. What matters more is whether the U.S. company does business only in its home country or worldwide.
For now, I would avoid those that do business only in the U.S. Apple, on the other hand, generates its revenue worldwide.
Or to put it another way: A Swiss company that generates the majority of its revenue in the U.S. will be more severely affected by the weakening dollar than a U.S. company that relies primarily on exports—that is, one that sells abroad.

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DiviDino 🦖.@DiviDino95

1Mo

@Olli68 So what do you think of the following companies in the portfolio: $GOOG $AAPL $KO $MA $MCD $MSFT $NKE (haven't bought it yet, but I'm considering it), $NOVO B (I'm considering this one, too), $PEP $PG $O $V

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Olli@Olli68

1Mo

@DiviDino95 $O From a currency perspective, I see this as the only problem child. The others, after all, generate their revenue worldwide.

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Olli@Olli68

1Mo

@DiviDino95 By the way, in my experience, gold is the best hedge against a weak U.S. dollar. When the dollar strengthens, gold falls. When the dollar weakens, gold rises.

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Markus@MarkusF

1Mo

@Olli68 I don't necessarily agree with that.

The U.S. is the most extreme consumer society in the world.
You just have to (actually, no matter where—though Switzerland is somewhat of an exception due to its comparatively low inflation) ALWAYS take inflation in the base currency into account when there's economic growth.

Even if you use that currency to make daily payments.
Ironically, the less inflation affects you in your daily life, the more you tend to ignore it.
(I also have to point out inflation in Germany to my boss every year during salary negotiations—he’s based in Switzerland, his salary is denominated in CHF, and mine is in EUR...)

Higher inflation (<10%) doesn’t necessarily mean a decline in profits.
Companies actually tend to benefit—salaries are adjusted retroactively, but prices are often adjusted immediately.
At the same time, bonds (that have already been issued) aren’t affected by inflation.

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Olli@Olli68

1Mo

@MarkusF This wasn't about inflation, but simply about currency trends.

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Markus@MarkusF

1Mo

@Olli68 But there is a connection.

If a currency depreciates relative to the supply of domestic goods (inflation), then it is also worth less compared to another currency that does not depreciate.

Of course, this doesn’t play out exactly one-to-one, since factors like trust also play a role here.
Ultimately, though, a currency is always worth whatever I can buy with it.
It doesn’t matter whether I pay for it with a good, a service, or another currency.

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Seventrader@7Trader

1Mo

Although the U.S. dollar is gradually losing purchasing power against the Swiss franc due to U.S. debt, it remains irreplaceable for the foreseeable future due to a lack of genuine, liquid alternatives in global trade and the bond market.

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DEW_7240@DEW_7240

1Mo

Currency risk only becomes truly relevant when you want to or have to realize profits.
What if the situation reverses in 10 years? Would U.S. stocks then be too expensive in CHF to get back in?
Generally speaking, you face exchange rate risk with all companies that aren’t listed in Zurich.
Therefore, reducing your exposure to the U.S. would “only” solve part of the problem as long as the Swiss franc remains this strong. The euro could also slide further, depending on the outcome of the elections in France or how the debt situation in the eurozone develops.

Of course, you have to decide for yourself how much exposure you want to have to a particular country, region, or sector.

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Jonas@Jonasbrunner

1Mo

As a 🇨🇭 investor, I have over 50% of my total investment (approx. 300k) in CHF (there are plenty of stable, attractive Swiss companies, after all) and only about 25% in USD (which is unlikely to recover significantly given the ongoing record levels of debt). And I have a portion of my ETFs hedged in CHF. This strategy is working out great for me.

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Froschkönig@DividendenFroschkoenig

1Mo

Why I don’t think the dollar will tank in the long run:

– The U.S. has energy, raw materials, a huge domestic market, and geographic advantages that Europe can only dream of.
– Militarily and geopolitically, the U.S. remains the dominant Western world power.
– AI, tech, semiconductors, platforms, and venture capital: The U.S. is in a completely different league here.
– The U.S. capital market is by far the deepest and most liquid in the world.
– The dollar is integral to global trade, commodities, credit, central bank reserves, and payment systems.
– China cannot simply replace the dollar due to capital controls and political risk.
And now Europe:
– Skyrocketing government spending.
– Debt is rising massively.
– Ever-increasing problems financing pensions and social welfare systems.
– An aging population: more and more retirees, fewer and fewer contributors.
– Germany is losing its industrial competitiveness.
– High energy prices, bureaucracy, bankruptcies, and capital flight.
– In the areas of AI and future technologies, Europe risks falling even further behind.
– At the same time, massive integration problems due to decades of high and, in some cases, uncontrolled migration from predominantly Muslim countries.
– The integration of large Muslim immigrant groups, in particular, poses significant social and political challenges for parts of Europe.
– The euro lacks a unified capital and government bond market comparable to that of the U.S.
– Political and economic interests within the EU are drifting further and further apart.
And what about the Swiss franc?
– A very strong currency and a solid economy.
– But Switzerland is far too small to replace the dollar as the world’s reserve currency.
– Furthermore, it is closely intertwined economically with the EU and will therefore go down with it in the long run.
– Switzerland, too, faces the same European demographic challenges.

Although I, as a German, wasn’t directly addressed, I’m 100% invested in U.S. stocks and so still felt somewhat addressed))

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