Positioning For A Weak Dollar

BusinessToday

22-06-2025

Standard Chartered Bank is maintaining an 'Overweight' stance on global equities, anticipating a constructive yet volatile second half of 2025. The bank's positive outlook is largely underpinned by expectations of a weaker US dollar, global policy easing, and a strong probability of the US economy achieving a soft landing.
In its latest market outlook, Standard Chartered highlights that a weakening US dollar historically benefits global equities, particularly non-US assets. Consequently, the bank has upgraded its position on Asia ex-Japan equities to 'Overweight,' signaling confidence in the region's growth prospects. They also favor 5-7 year maturities in US dollar bonds and have upgraded Emerging Market (EM) local currency bonds to 'Overweight,' noting their potential to benefit from a weaker greenback and anticipated rate cuts by EM central banks.
'Policy easing worldwide, strong chances of a US soft landing, and a weaker USD are supportive of risky assets,' stated the bank in its report. 'We favour diversified global equity exposure.'
The second quarter of 2025 has been characterized by significant market fluctuations, including events such as 'Liberation Day' (referring to the transition of Nifty contracts to SGX GIFT City in July 2023) and ongoing Middle East tensions. Despite this volatility, global equities have seen an approximate 8% gain quarter-to-date.
Looking ahead to H2 2025, Standard Chartered expects economic and earnings growth to remain constructive. The US economy, despite earlier soft survey data, has shown resilience in 'hard data,' supporting the bank's belief in a soft landing scenario. This is further bolstered by supportive fiscal and monetary policies across the US, Europe, and Asia.
However, the bank cautions investors to remain vigilant against several key risks. The end of President Trump's 90-day tariff 'pause' in early July is a point of concern, with Standard Chartered expecting extensions that may be accompanied by heightened rhetoric in trade discussions. Ongoing conflicts in the Middle East and between Ukraine and Russia also continue to simmer, with the former posing a potential, though likely brief, risk of higher energy prices.
Standard Chartered's base case anticipates these risks will result in temporary, rather than sustained, volatility. The top three risks closely monitored by the bank include:
A sustained rise in trade tariffs. A significant jump in oil prices due to geopolitical events. A sudden decline in US hard economic data towards recessionary levels.
To mitigate these risks and navigate potential temporary volatility, Standard Chartered identifies Gold and Alternative Strategies as attractive diversifiers for investment portfolios.