August 5, 2025

Gargi Chaudhuri, Chief Investment and Portfolio Strategist at BlackRock, notes that while the dollar experienced a significant decline in the first half of the year due to shifts by international investors and worries over tariffs and deficits, this drop appears to have paused recently. Historically, such currency fluctuations aren't fleeting; they often follow broader patterns over extended periods. Chaudhuri warns that there may be additional weakness for the dollar in forthcoming quarters, suggesting investors should adjust their strategies accordingly. Given the current market dynamics, Chaudhuri advocates that investors explore increasing their international exposure. She points out that many financial advisors are underweight in international equities relative to benchmarks, such as the MSCI ACWI, which includes a wide range of international countries. Investors in the U.S. should consider allocations to countries like India, China, and Japan, as well as European financial sectors. This adjustment isn't about completely moving away from U.S. markets, but rather about creating a well-rounded portfolio with international assets. Chaudhuri highlights the appeal of fixed income investments, especially as U.S. investors can now access yields between 6% and 6.5% in international fixed income without raising credit risk significantly – a rare opportunity. She underscores that diversification into international fixed income can enhance yields, making it a pivotal strategy for investors seeking to bolster their returns while managing risks. When it comes to sector concentration, Chaudhuri notes that the current market behavior appears to lean heavily towards tech, particularly influenced by advancements in artificial intelligence (AI). This trend is not particularly negative; in fact, it reflects the performance of major companies that are able to demonstrate significant revenue growth due to substantial capital expenditure investments in technology. While some sectors such as industrials and financials are also experiencing growth, they have not matched the pace of tech, which continues to capitalize on revenue generated from AI innovations. The dollar’s trajectory will have influences on various market segments, including tech stocks in the U.S., where a weaker dollar can benefit overseas revenue streams. Chaudhuri mentions that after a sharp downturn, the dollar is currently experiencing a rally, but historical data suggests that it may not hold for long, indicating that investors should consider positioning themselves for another potential decline. In conclusion, while U.S. tech companies thrive, it’s becoming increasingly crucial for investors to diversify their portfolios by adding international equities and fixed income assets. Chaudhuri suggests that now might be the ideal time to take advantage of attractive yields and growth opportunities outside of the U.S., preparing for an evolving global financial landscape as further movements in the dollar unfold.

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Tags: Blackrock, Gargi chaudhuri, Us dollar, International investments, Fixed income,