{"id":10199,"date":"2025-11-03T14:25:25","date_gmt":"2025-11-03T14:25:25","guid":{"rendered":"https:\/\/zacksim.com\/financial-professionals-insights\/?p=10199"},"modified":"2026-01-13T14:34:35","modified_gmt":"2026-01-13T14:34:35","slug":"dont-buy-the-dollar-debasement-story","status":"publish","type":"post","link":"https:\/\/zacksim.com\/financial-professionals-insights\/dont-buy-the-dollar-debasement-story\/","title":{"rendered":"Don’t Buy The “Dollar Debasement” Story"},"content":{"rendered":"\n

Dollar Doom? Markets are Telling a Different Story<\/strong><\/p>\n\n\n\n

Headlines have been buzzing over the last several weeks as gold and other \u201chard\u201d assets have sprinted higher. The rally has been accompanied by a familiar storyline: investors are supposedly fleeing dollar assets, termed the \u201cdebasement trade,\u201d because of the U.S.\u2019s unsustainable fiscal trajectory, deficit spending, upended global trade, etc.1<\/sup><\/p>\n\n\n\n

In the most extreme of cases, the narrative is that the dollar is doomed, which means investors need to look beyond dollar-denominated assets for secure investment opportunities.<\/p>\n\n\n\n

Don\u2019t \u201cbuy\u201d it.<\/p>\n\n\n\n

If the dollar were genuinely under siege and U.S. financial assets were being shunned, we would see telltale signs in various corners of the market. But we\u2019re not.<\/p>\n\n\n\n

Start with bonds. When investors fear a long-run loss of purchasing power, they usually demand higher yields to compensate. Instead, the opposite has unfolded: the 10-year Treasury yield is notably lower than where it began the year, and even the 30-year, typically most sensitive to long-term inflation worries, has drifted down as seen in the chart below. That isn\u2019t the behavior of a market dumping Treasurys. On the contrary, it points to steady demand.<\/p>\n\n\n\n

10- and 30-Year U.S. Treasury Bond Yields<\/em><\/strong><\/p>\n\n\n\n

\"\"
Source: Federal Reserve Bank of St. Louis2<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n

Another place to look is inflation expectations. The 10-year breakeven rate sits a bit above 2.2%, and 30-year expected inflation is near that level as well. In other words, expectations are pretty firmly anchored, with bond markets still expecting inflation to average close to the Fed\u2019s target over the long haul. If investors truly believed a lasting bout of currency erosion was at hand, you would expect those measures to pop, dramatically. They haven\u2019t.<\/p>\n\n\n\n

10- and 30-Year Expected Inflation<\/em><\/strong><\/p>\n\n\n\n

\"\"
Source: Federal Reserve Bank of St. Louis3<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n

The dollar tells a similar story. After a weak first quarter, the broad trade-weighted dollar index has been broadly stable for months and has even outperformed several major peers recently. If fears of dollar erosion were truly driving flows, you would likely see a cocktail of rising long-term nominal yields, widening corporate credit spreads, and a sliding greenback. We\u2019re just not seeing that now.<\/p>\n\n\n\n

To be sure, I\u2019m not making an argument against gold or other inflation hedges here. A modest allocation can diversify portfolios and dampen volatility, particularly during bouts of geopolitical stress or when real yields fall. The keyword is \u201cmodest.\u201d Going all-in on a single narrative leaves investors exposed to timing and headline risk. If markets have taught anything in the last few years, it\u2019s that stories can travel faster than fundamentals, and then reverse just as quickly.<\/p>\n\n\n\n

Long-time readers of my columns know what I see as the most effective inflation hedge over time: owning stocks. Buying shares of leading businesses offers a natural inflation valve, since companies can lift prices, improve efficiency, and compound earnings over time. Across most rolling 10-year periods, U.S. stocks have outpaced inflation\u2014even through episodes of rising deficits, shifting policy regimes, and currency fluctuations<\/em>. Over longer investment horizons, which most investors have, profits and dividends have been powerful antidotes to inflation and currency fluctuations. I don\u2019t see that changing now.<\/p>\n\n\n\n

Bottom Line for Investors<\/strong><\/p>\n\n\n\n

The so-called \u201cdebasement trade\u201d may have a kernel of logic behind it, but not the kind of logic that justifies labeling the dollar as doomed. When you strip away the noise, what markets are signaling is stability, not debasement. Bonds are rallying, inflation expectations are anchored, and the dollar remains the world\u2019s preferred reserve currency. I\u2019m confident that will not change in our lifetime. For investors, that means this is not the time to overhaul portfolios in favor of hard assets or chase a narrative about dollar decline. The playbook hasn\u2019t changed: own the world\u2019s most productive companies, stay diversified across asset classes, and let corporate earnings compound over time. A small allocation to gold or other real assets can provide ballast, but the real protection against inflation or dollar weakness is the same as it\u2019s always been, in my view: Own stocks.<\/p>\n","protected":false},"excerpt":{"rendered":"

Investors are supposedly fleeing dollar assets. But the markets are telling a different story. <\/p>\n","protected":false},"author":4,"featured_media":9953,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[181,1],"tags":[],"class_list":["post-10199","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-professionals","category-mitch-on-the-markets"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/10199","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/comments?post=10199"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/10199\/revisions"}],"predecessor-version":[{"id":10203,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/10199\/revisions\/10203"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/media\/9953"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/media?parent=10199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/categories?post=10199"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/tags?post=10199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}