Stocks Are Soaring — But the Dollar’s Sinking. What Smart Investors Are Doing Right Now
Written by
Jacob Wade
Edited by
Zuri Anderson
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The U.S. Dollar is weakening, and this could affect your portfolio. While the S&P 500 just hit fresh highs, the fact that it comes with international currencies getting stronger may be of concern to U.S. investors.
But smart investors are leveraging a different investment approach that can protect against a sharp downturn in U.S. dollar value. GOBankingRates reviews what investors can do to make sure they can keep their portfolios in shape.
Why Is the U.S. Dollar Losing Value?
In short, the U.S. dollar has been losing value to other strong global currencies (such as the Euro) due to Trump tariffs.
With an increase in tariffs on imported goods to the U.S., foreign investors have backed off on purchasing U.S. Treasuries. Even with strong yields, the U.S. recently saw a drop in its overall credit rating, stoking fears of the ability for the U.S. to pay interest on the issued Treasuries, as reported by NBC News.
Combined with potential inflation and economic growth slowing due to high tariffs, investors are pivoting away from U.S. Treasury investments, causing the dollar to lose over 10% of its value compared to other global currencies.
With the dollar losing value, this can cause inflationary pressures and may indicate lower-than-expected returns in U.S. equity markets going forward.
What Investments Help Protect Your Portfolio?
If a declining U.S. dollar points to lower equity returns, what should investors be doing to protect their portfolios?
First, it’s important to note that while the U.S. dollar is weakening in 2025, historically it has held its value globally, and is stronger today than it was just a decade ago (in many countries).
A short-term drop in the value of the U.S. Dollar doesn’t mean it’s going to be weak forever, and making long-term investment decisions based on short term drops in value may not be the best approach.
That being said, investors that do expect this trend to continue, and expect lower returns on U.S. equities in the coming months (or even years), can hedge against a weak dollar in several ways.
- Foreign equities: While high tariffs have hurt U.S. businesses and the U.S. dollar, foreign equities are still seeing strong growth. In fact, ex-U.S. equity indices have outperformed U.S. indices in 2025 so far by nearly 10%. Investing globally instead of in just U.S.-based companies can help you protect from slow growth in the U.S.
- Commodities: Commodities (such as agriculture, metals and energy stocks) can help hedge against a weaker U.S. dollar. As the dollar weekend, commodities become “cheaper” to foreign investors, which could increase demand. This can push the price higher, even as the U.S. dollar drops in value.
- Gold: Gold is a timeless “safe haven” asset that helps preserve purchasing power over time. In uncertain and inflationary markets, Gold tends to rise in value. As the U.S. dollar weakens, Gold could continue to grow in value due to increased demand for assets that hold their value, independent of fiat currencies.
Upsides of a Weaker U.S. Dollar
Hedging your portfolio against a weakening U.S. dollar can help protect your investments, but there may also be a few upsides to a devaluing of the U.S. Dollar globally.
As the U.S. Dollar weakens against foreign currencies (like the Euro), this effectively lowers the price of U.S. goods to foreign inventors. This may increase demand for U.S. goods, which can help boost the economy.
Plus, owning U.S. stocks at today’s dollar prices can be a good investment. As foreign investors can purchase more U.S. stocks for less of their local currency, this can push prices of U.S. stocks up.
And if you own an inflation hedge asset like real estate (with a mortgage), you’re paying down your future home payments with less valuable U.S. Dollars. This is effectively a discount on your mortgage payments by the decline in value of U.S. Dollars each year.
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