Chart is for illustrative purposes only. Past performance is not necessarily an indication of future results.
The conflict in the Middle East has seen oil prices rise, equities fall slightly, and investors flock to what have been historically considered “safe haven” assets. In times of turmoil, investors often seek the stability of the U.S. dollar (USD) because of its reserve currency status and liquidity, as well as the perceived credit strength of the U.S. This episode of geopolitical uncertainty is proving to be no different with the USD gaining strength relative to global peers.
Historically, the performance gap between U.S. equities and the rest of the world has hinged on the relative strength of the USD. While a weaker USD makes U.S. exports more competitive, this has often coincided with the outperformance of major non-U.S. indices on a relative basis. That pattern has been evident over the last year, with international equity benchmarks outperforming the S&P 500.
In our view, signs of USD stabilization suggest the tailwind from dollar weakness to non‑U.S. outperformance has likely peaked. The USD is near its highest level since May 2025, and the combination of sticky inflation, U.S. energy independence and resilient growth could limit further dollar softness and challenge the recent leadership of international markets. We believe diversifying across geographies and asset classes remains prudent to capture potential upside amid today’s varied global conditions.
All investments involve risk, including the possible loss of principal. Certain investments have specific or unique risks that should be considered along with the objectives, fees, and expenses before investing.
Asset allocation and diversification cannot ensure a profit or protect against a loss.
Sticky inflation refers to a persistent economic scenario where prices for goods and services do not adjust quickly to changes in supply and demand dynamics.
The S&P 500 Index: The S&P 500 Index is a stock‐market index that tracks the performance of 500 of the largest publicly traded U.S. companies, weighted by their market capitalization, and is widely used as a benchmark for the overall U.S. equity market. The MSCI All-Country World Index tracks the performance of both developed and emerging Market equities. Investors may not invest directly into any index.
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