Financial Industry Insights from Advisors Asset Management


The Dollar "Bears" Watching

U.S. dollar, U.S. twin deficits % of GDP

Source: Bloomberg, U.S. Treasury and Todd Asset Management as of 8/28/2020
U.S. Twin Deficits = U.S. Federal Budget Deficit + Current Account Balance. These series are shown as a percent of US Nominal GDP and led by 2 yrs.

  • The COVID-19 Pandemic has been unprecedented in many respects, as has the response from policy makers to stabilize the economy. As a result, deficit spending has exploded to the widest level since WWII, accounting for more than -17% of U.S. GDP.
  • Historically, rising deficits have led to a much weaker dollar. With the dollar trading at multi-year lows, we believe headwinds continue to pile up (i.e. lower interest rates in U.S., global economic recovery, etc.) that can push the dollar much lower over the coming years.
  • A bear market for the dollar would also have implications on several other familiar trades that have become historically stretched. A weakening dollar has typically coincided with Value outperforming Growth and International markets outperforming the U.S. Leadership changes tend to occur around recessionary bear markets and the weakening dollar may be indicating a rotation from Growth to Value and U.S. to International is on the way.

CRN: 2020-0909-8566 R

The opinions and views of this commentary are that of Todd Asset Management and are not necessarily that of Advisors Asset Management.

This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit



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