US Exceptionalism And The Long-Term Trend For The Dollar And Bond Yields

In this report, we try to gauge how long the exceptional performance of the US can last, but from a more nuanced angle – inflows into US assets and the impact on the dollar and bond yields. Our work suggests that investors should not make any huge bets on the dollar today, but should be short over the longer term (3-5 years). Empirical evidence also suggests you want to be long US bonds into any downturn, relative to global-ex-US duration-matched government securities, but that view becomes less certain if the global economy avoids a downturn in the next few months. What is interesting in this report are high some conviction views across currencies, bonds and precious metals.