Why global investors should look beyond the US dollar

In a world of political risk and economic recalibration, diversification isn’t just a wise move – it’s essential, writes Nigel Green.

Global investors should consider all angles to prevent their hard-earned flying out the window. Pic via Getty Images

After a rocky few weeks, the S&P 500 and the tech-heavy NASDAQ 100 have bounced back to levels seen before the April 2nd ‘Liberation Day’ tariff announcements.

But this recovery masks a deeper unease – one that prudent investors would be wise not to ignore.

Yes, US equities have staged a comeback. But this has less to do with confidence in the economic outlook and more to do with muscle memory.

Retail investors, riding a wave of decent Q1 earnings and reassurances from Washington that the trade war may not spiral further, are once again buying the dip. This reflex has worked for over a decade – but this time, the risks are different, and global investors should take note.

Under the surface, nerves are fraying. Defensive assets that rallied during the recent turmoil – such as gold, the Swiss franc, and German Bunds – have given up some gains, but crucially, not all. That suggests investors aren’t convinced the storm has truly passed.

Meanwhile, the US Federal Reserve chose to hold rates last week, praising the resilience of the economy while issuing its latest warning about tariffs threatening jobs and inflation. However, markets, which had priced in multiple rate cuts for this year, may soon have to face the reality that the Fed isn’t in a hurry to act.

Still, the real issue weighing on sentiment isn’t monetary policy – it’s the unpredictability of President Trump’s economic approach. From erratic tariff announcements to sudden policy pivots, investors are struggling to make sense of what comes next.

The VIX index, a measure of expected volatility in the S&P 500, remains elevated, indicating that uncertainty is still high. Treasury markets, which should have offered a haven during April’s sell-off, failed to do so. The 10-year yield is still 10 basis points higher than it was before the Liberation Day shock – hardly a reassuring sign.

And then there’s the dollar.

The trade-weighted dollar index is hovering near a seven-month low. For an economy whose assets are priced in dollars, this is a flashing yellow light. For investors based outside the US, particularly those without dollar-based liabilities (such as tuition fees or business costs), the message is clear: it’s time to reconsider your exposure.

Now is the moment to look outward, beyond the US. Investors who take a global view can not only reduce currency risk, but also tap into undervalued opportunities across markets.

Start with bonds. In the UK, 10-year gilt yields now exceed the domestic inflation rate – meaning investors can earn positive real returns in a developed, stable market. That’s a rarity in today’s world, and one that should not be ignored.

Then consider equities. European and Asian stocks continue to trade at lower valuations than their American counterparts. And yet, despite this discount, many have outperformed US equities so far this year. That’s a double advantage: lower price tags and stronger momentum. Investors who have so far ignored these regions in favour of US tech should think again.

Alternative assets also deserve a place in the conversation. Gold remains a credible store of value during times of policy risk and currency weakness. Structured products can provide defined returns and protection in choppy markets.

A diversified portfolio, spread across geographies and asset classes, offers not just resilience, but opportunity.

What we’re witnessing isn’t just a temporary patch of turbulence – it’s the market grappling with the limits of American exceptionalism. For years, the US has offered global investors a compelling package: innovation, growth, and a strong dollar. But that package is fraying. Policy uncertainty, trade frictions and shifting macro dynamics are forcing a rethink.

That rethink should begin with your portfolio.

Clinging to US-dollar assets in the hope that past performance will repeat is not a strategy – it’s a gamble. A smarter approach is to diversify globally, reduce concentration risk, and allocate to regions where valuations still offer value and returns are not shackled to erratic political announcements.

It’s not a question of abandoning the US altogether. It’s about balance. The dollar no longer offers the same haven it once did. US Treasuries failed their latest test. And American equities, while still dominant, are starting to look expensive and fragile.

Global investors should recognise that the world is bigger than the S&P 500. There is yield in the UK, growth in Asia, and value in Europe. The portfolio that thrives over the next decade won’t be the one chasing yesterday’s winners – it will be the one prepared for tomorrow’s realities.

The lesson of the past month is this: hope is not a hedge. In a world of political risk and economic recalibration, diversification isn’t just a wise move – it’s essential.

The views, information, or opinions expressed in the interviews in this article are solely those of the author and do not represent the views of Stockhead.

Stockhead does not provide, endorse or otherwise assume responsibility for any financial advice contained in this article.

Nigel Green, is the group CEO and founder of deVere Group, an independent global financial consultancy.

Originally published as Why global investors should look beyond the US dollar