Hey, what’s up? Here’s the skinny on the U.S. dollar taking a nosedive this month. Investors are jittery because they reckon the Federal Reserve is primed to cut interest rates next month. The so-called "Trump trades" are coming unwound, and the dollar has taken a 2.2% dip against a basket of other currencies. That’s the lowest since the year kicked off. The Invesco DB US Dollar Index Bullish Fund (UUP) has shed 2.3% in the last month. You can check more about it here.
why is the dollar slipping?
The Fed minutes dropped a big hint. Rate cuts are likely at the next policy meeting in September. The data trends aren’t helping either. They scream economic slowdown. For example, July’s job scene was grim. Only 114,000 jobs were added, 35% less than expected. Unemployment shot up to 4.3%. That’s a notable jump and the highest since October 2021. Oh, and U.S. manufacturing? It hit an eight-month low in July due to plummeting new orders.
The Kitchen Sink Effect
Adding to the gloomy vibe, the Bureau of Labor Statistics did a major revision of payroll numbers. They found the U.S. created 818,000 fewer jobs last year than we thought. This is the biggest downward revision since 2009. With such data, Wall Street is pretty much sold on a rate cut next month. CME Group’s FedWatch tool has it at a 100% chance. Talk about a sure bet.
the democratic twist
Let’s not forget the political angle. The rising chance of a Democratic win in the upcoming election isn’t doing the greenback any favors either. Investors think Trump’s policies, which include tariffs and immigration restrictions, could hike inflation more than those of Kamala Harris—a leading Democratic candidate. For more on her strategy shift, have a look here.
what does a weak dollar mean?
Hold up, it’s not all doom and gloom. A weaker dollar actually juices up blue-chip companies. They rake in more dough from international markets. Foreign investors find dollar-denominated assets cheaper, making U.S. multinationals more competitive. Companies with hefty international sales will likely shine bright.
get ready for commodities and emerging markets
A weak dollar? Bingo! Commodities, emerging markets, and gold mining stocks get a big lift. More capital pours into emerging markets, hiking up their stocks.
etfs to bet on
Seeing the weak dollar trend, a few ETFs are likely to benefit. Here are some prime picks:
vanguard mega cap growth etf (mgk)
With an AUM of $22.1 billion, this ETF tracks the CRSP US Mega Cap Growth Index. It’s got 71 securities, heavy on IT, consumer discretionary, and healthcare. The trade volume is solid, around 375,000 shares a day. The fee? Just 7 basis points annually. It’s a good buy. Click here for more on its recent performance.
| ETF | MgCap Growth ETF |
|---|---|
| AUM | $22.1 billion |
| Fees | 7 bps |
| Avg Daily Vol. | 375,000 shares |
| Ranking | #2 (Buy) |
| Sectors | IT, Healthcare, Dis. Consumer |
invesco db commodity index tracking fund (dbc)
This fund tracks the DBIQ Optimum Yield Diversified Commodity Index. It’s heavy on 14 major physical commodities. With a decent AUM of $1.5 billion and a keen daily trading volume of 1 million shares, the fee is 87 bps. Dive deeper into commodities here.
| ETF | DBC Commodity ETF |
|---|---|
| AUM | $1.5 billion |
| Fees | 87 bps |
| Avg Daily Vol. | 1 million shares |
| Commodities | 14 major commodities |
ishares msci emerging markets etf (eem)
This ETF focuses on large and mid-sized companies in emerging markets, holding a diversified 1,236 securities. The big players? Chinese firms make up 24.4%, with India, Taiwan, and South Korea trailing with double-digit exposures. The fund’s AUM sits at $17.9 billion. Annual fees are 70 bps with a hefty trade volume of 25 million shares. It holds a medium risk outlook. Get the latest scoop here.
| ETF | EEM Emerging Markets |
|---|---|
| AUM | $17.9 billion |
| Fees | 70 bps |
| Avg Daily Vol. | 25 million shares |
| Portfolio | 1,236 securities |
| Ranking | #3 (Hold) |
vaneck gold miners etf (gdx)
For gold enthusiasts, GDX is a popular choice. It follows the NYSE Arca Gold Miners Index. With a fat AUM of $14.7 billion and robust daily volume of 17 million shares, it holds 60 stocks. Canadian firms dominate, making up 42.1% of the portfolio. The U.S. takes 19.4%, followed by South Africa and Australia. The fee is 51 bps. Read more about its potential here.
| ETF | GDX Gold Miners ETF |
|---|---|
| AUM | $14.7 billion |
| Fees | 51 bps |
| Avg Daily Vol. | 17 million shares |
| Focus | Gold Mining Industry |
So, there you have it. The U.S. dollar’s in a tight spot, but savvy investors know where the opportunities lie. Keep your eyes peeled for these ETFs, and let’s ride this wave together!
