Gold 
“Many on Wall Street—and in the White House—believe the greenback’s decline has been a long time coming. Heading into 2025, American currency had appreciated more than 50% from its lows during the Great Financial Crisis, according to JPMorgan Private Bank, and dollar strength helped U.S. stocks become the envy of the world.
A weaker greenback now appears to be giving foreign equities a chance to catch up. But with America still the primary hub of the AI revolution
Still, President Donald Trump’s chaotic tariff rollout may have ushered in a new era for the dollar. Earlier this month, it was down 10% year to date against the basket of currencies in the famous DXY index. That’s the steepest loss for the greenback in the first half of the year, per Reuters, since 1986, shortly after the U.S. and several allies had reached an agreement, known as the Plaza Accord, to devalue a wildly overpriced dollar.
And while there has been a slight recovery amid the conflict between Iran and the Israel-U.S. alliance, investors haven’t come close to making up for the exodus since “Liberation Day” in early April. That suggests the so-called “Sell America” trade still has legs, Bill Sterling, global strategist at GW&K Management, told Fortune last week.
“In the scheme of things, there’s ample room for the dollar to decline further,” said Sterling, formerly the chief international economist at Merrill Lynch.
If tariffs continue to weigh on America’s growth outlook, U.S. assets become less appealing. And while it doesn’t seem the dollar will be replaced as the world’s reserve currency anytime soon, it may no longer command the same amount of confidence.
Over the last few decades, Sterling noted, foreigners have funded America’s exploding deficit by purchasing U.S. assets, whether that be stocks, Treasury bonds, dollars, and the like. While the GOP’s “Big, Beautiful” spending bill doesn’t seem poised to change the national debt’s trajectory, it does include provisions set to hike taxes on foreign capital from several key trading partners.
“At a time when we have a deficit-to-GDP ratio of 7% and need foreign capital to help fund that deficit,” Sterling said, “to be actively considering measures to discourage capital inflows is almost a recipe for a weak dollar.”
In his view, rapid policy shifts in Washington have prompted a long-awaited correction to an overvalued dollar. He and many others point to purchasing power parity, a framework that assumes exchange rates, in the long run, should allow a given amount of money to purchase the same amount of goods and services in any country.
Popularized by The Economist’s Big Mac Index, there are plenty of reasons why this concept often doesn’t play out in the real world. Data from the International Monetary Fund showed the dollar was 105% overvalued on a purchasing power basis last year, topping previous peaks in 1985 and 2002, Sterling wrote in a recent research note.
However, such an imbalance can’t exist forever, he said, and the ball may now be rolling. According to Bank of America’s monthly fund manager survey, shorting the U.S. dollar has become one of the world’s most popular trades—but over 60% of respondents still said the greenback is overvalued.
“And once a trend gets established,” Sterling said of currency markets, “it can sometimes feed on itself.” “
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