US dollar's 14-year run hits 'immovable' Trump - structural shift underway

Ninety One, managing £130.8bn, released a white paper, “The Unstoppable Dollar Meets the Immovable Mr Trump,” predicting the end of a 14-year US dollar upcycle. Sahil Mahtani, Head of Macro Research, told BizNews the dollar faces an inflection point driven by geopolitics, interest rates, investment trends, and currency interventions. He forecasts a potential 25% decline, signalling a multi-year bear market with implications for asset allocation. Mahtani notes investors are diversifying from US equities, potentially boosting non-US assets in emerging markets and Europe. He says the Chinese renminbi’s global reserve status hinges on China easing capital controls..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..Watch here.Listen here.Edited transcript of the interview.Linda van Tilburg (00:01.455) I'm joined in the studio today by Sahil Mahtani, head of macro research at Global Investment Manager 91. He has just dropped a humdinger of a white paper titled The Unstoppable Dollar Meets the Immovable Mr. Trump. It's a forecast for global currency markets, and the dollar's reign could be in for a shakeup. Sahil, welcome to the studio. It's so great to have you with us.Sahil Mahtani (00:29.418) Thank you so much for having me, Linda.Linda van Tilburg (00:31.693)So why do you believe we're approaching the end of a 14-year U.S. dollar upcycle?Sahil Mahtani (00:38.398)There have been a lot of predictions for the decline of the dollar in the last few years. They've been wrong. The dollar's gone up. As you say, the dollar's been on an uptrend for 14 years. There are four factors, four drivers of dollar inertia, both on the upside and the downside. The first is geopolitics. The dollar attracts structural flows because the U.S. is a central part of the global economy. There are interest rate differentials where countries are out of sync with other countries and therefore attract flows because they're growing faster than other countries for long periods. There's the investment industry, my industry, which develops trends and pushes capital into an asset class for long periods of time. Then there are currency intervention periods that occur at cyclical peaks. So, if you think about inflation in a domestic economy, when inflation exceeds a peak in an inflation targeting regime, the central bank intervenes. In the dollar, it's a global currency market, and there's no regulator. Typically, you get periods of intervention at peaks and troughs, as you experienced in 1971 and 1985. And that accounts for dollar inertia, and all four of those things could be changing right now as well.Linda van Tilburg (02:02.242)Well, you say in your report that the macroeconomic and policy levers are all in the red now. So, are they flashing?Sahil Mahtani (02:11.465) Yeah, so if you look at the four drivers, geopolitics, obviously tariffs have increased massively. We've gone from two and a half per cent tariffs on average imports in the U.S. to something above 10%. What we didn't have in 2017 and 2020, when the market was also convinced the dollar was about to decline, is a growth story in Germany.For the longest time in the last few years, Germany’s been about the industrialisation of Europe’s business news story. Europe’s been terrible, and you know, for the first time, you're starting to see big spending in Germany on infrastructure and defence. We've had a Macron visit the UK on a state visit. This time, it's the first state visit of the European head of state to the UK since Brexit. There are things being repaired here and budgets that are being spent, so that's good.The investment industry is getting excited about asset losses that are not U.S., not to say that the u s equity market is going to fall out of bed but fact is European equities have outperformed us this year, Yen equities have outperformed the U.S. this year so people are getting new ideas and then finally the U.S. seems to want a weaker currency if you look at the capital controls they're talking about if you look at the Mar-a-Lago Accord that one member of the Trump economic team has mooted. So yeah, I think like all those things are starting to play out in a way.Linda van Tilburg (03:44.461) And just look at how heavily allocated our global portfolios are towards U.S. assets today.Sahil Mahtani (03:51.722) So, they are very heavily allocated. That's partly because the underlying asset allocation for equities, for example, for the benchmark reached about 70 % in Q4. So, 70 % of all global equities in the global benchmark were U.S. stocks, which is very high. Usually, it's somewhere close to 50 to 60 or 40, 45 at troughs.What happened was that the asset allocation community was also getting a benefit of a dollar uptick, so the dollar would outperform other currencies by one to three percentage points every year. They started to reduce their hedges they started to say okay I’m getting the benefit of the dollar I’m getting the benefit of the underlying asset allocation which is underperforming other regions so let me just keep increasing my exposure to the U.S. and of course this year if you had done that you're really underperforming.So suddenly those people are feeling the pain, and they're starting to rethink whether they think this is going to continue in the years ahead.Linda van Tilburg (04:57.183)So, are you saying the Trump shock is not only tariffs, but it might also be on the U.S. dollar's dominance?Sahil Mahtani (05:03.879)Okay, so I think you don't need to go there. I think this whole conversation about dollar dominance is an interesting conversation. It's a political conversation. I would park it. The dollar has had three full cycles since 1971, since the Nixon Gold Shock. All throughout this time, the dollar has been dominant, right? And the dollar's going up and the dollar's going down.So, you don't need to say that we're going to see the end of the dollar, the rise of the renminbi, the rise of bitcoin. You don't have to go there to just say asset allocators need to think about a cyclical dollar bear market of the kind that we had in the 2000s, or in the 1980s, or in the 1970s. I think it's just a normal cyclical dollar bear market.Linda van Tilburg (05:48.854) So, you've mentioned a little bit about that, but what adjustments might investors make to make sure that, in this time that we enter a dollar down cycle, they do the right thing?Sahil Mahtani (06:02.483)The first thing to know is that because the world borrows in dollars, when the dollar declines, it's as if there's a surge of global liquidity into the global economy because the borrowing costs decline. So, actually, the dollar down cycle is pretty good for all asset classes, including the U.S., on a one or three-year-out basis. It is, however, much, much better for non-US assets.So, emerging markets typically do well because they are more likely to borrow in a hard currency like the dollar and earn in a local currency. So when the dollar goes down, their ability to service their debt payments goes up. Europe does well, and Japan does well. You're not starved for choice, but it really depends on where the growth story is. Where do we actually think we're going to get an interesting growth story? And I think what is interesting about this cycle is that AI seems to be a much more global trend. The initial AI upsurge was a U.S. upsurge, and people invested in infrastructure. But then we had the Deep Seek moment in February, and China is now incentivising AI in their economy. The Europeans are a bit late, but they're catching up. AI might very well be a global story, in which case really a global economic upsurge.Linda van Tilburg (07:29.63)So, do you think the transition will be a slow pivot or a sudden correction?Sahil Mahtani (07:35.502) It's a good question. At the moment when I put my cyclical economy hat on, the Fed is getting more comfortable with cutting. So, that suggests that the dollar decline is going to happen sooner because interest rate differentials correct faster. The U.S. economy seems pretty strong, though. So that augurs for a slower transition.I think it depends on how quickly Europe and China can grow and be convincing. I think the European growth story is baked in. I think the China growth story is less baked in. But if suddenly you were to see a major transition in China, I think this could kick off pretty quickly.Linda van Tilburg (08:23.051) So, are the early signs of capital migration away from the dollar?Sahil Mahtani (09:10.333)Yes, so there's a bit of, there are surveys and there are early data that suggest that investors are allocating less to the U.S., although the flows are still positive and they're allocating more towards Europe. Just keep in mind, the headline is a big number, right? So, foreign investors have about $32 trillion of U.S. assets, both in equity and fixed income.$20 trillion of that is G10, the rest is from emerging markets. There are hedge ratios that investors have put on where they're hedging the U.S. exposure. So, what I calculate is that what we calculate at the Investment Institute is that hedge ratios on bonds fell 5 % and equities 1 to 2 % and if you unwound that, that would create about $1 trillion of selling.But you know that is in the context of the $32 trillion I mentioned of foreign investors owning the U.S. assets, and the FX market daily turnover is about $10 trillion. So, these are huge numbers, and it kind of explains why the dollar cycles are super long. The dollar cycle is longer than an equity cycle. It's longer than a commodity cycle. It's longer than a typical credit cycle, and it's 18 years for a full cycle. So, I think this will play out over a multi-year period. The dollar is down 11 % from its peak, but it's only down 4 % since the Trump election. So, you're starting to see the numbers here; it will take a multi-year period for this to play out.Linda van Tilburg (10:52.55) So, how do you imagine the Trump administration or the Federal Reserve might respond to your paper's conclusions?Sahil Mahtani (11:00.147) So, I think the Trump administration is quite sanguine about a weaker dollar because the U.S. consumer loses purchasing power if the dollar declines, but if everything else is going up and you're getting an AI boom and an investment boom at the same time, life is actually fine. I think the Trump administration is trying to rebalance the global economy in the U.S.'s favour and correct some of the underlying imbalances.They have five pillars. They've got tariffs, they've got immigration, they've got deregulation, fiscal and energy. Markets are doing quite well because I think they're anticipating deregulation. They're expecting some sort of fiscal boost from the recent bill that was passed. So, I think it's okay. The Federal Reserve is focused on growth and inflation. They really don't want another inflation shock because they got it wrong after the pandemic, and they can't get it wrong twice in a decade. So, they will be more vigilant, I think, than they would have otherwise been about inflation. The good news is that the Fed's own models say that when you increase tariffs, the growth slowdown outweighs the inflation surge. So, in fact, the economy slows a bit more instead of you getting this kind of stagnation outcome that people are expecting.I actually think it's a pretty benign scenario, and by the way, that's kind of what the markets are telling you,Linda van Tilburg (12:32.467) So, you're not predicting the end of the dollar.Sahil Mahtani (12:37.961) No, I don't think you need to predict the end of the dollar. What I'm predicting is a major shift in the dollar's value, which is important for portfolios. So, just to keep it in context, the average of previous dollar bear markets is a 32 % decline. We've already had a 4-5 % decline, so you've probably got another 25 % in a multi-year bear market. It's a pretty big move. Is it the end of the dollar? No.Linda van Tilburg (14:44.229) So, this is not about the rise of China's currency, the renminbi?Sahil Mahtani (14:54.609) No, I think that is a separate question, and the Chinese have to make a decision about how loosely they want to tie their currency into the global economy. So, for example, if you buy dollars and you save in dollars, you can buy assets in the U.S. relatively easily. If you save in renminbi and you accumulate that, it's a little bit harder to buy assets in China and then take those assets out of China because there are strong capital controls. The world thinks doesn't mind holding Chinese Redman B's, and they're willing to do it, but they need to make it easier to buy goods and services and move capital in and out of China. And the Chinese are just not ready to do that.

US dollar's 14-year run hits 'immovable' Trump - structural shift underway

Related Stories

Jim O'Neill on BizNews asking the question markets don't want to answer

Why UK property still appeals to SAns: undersupply, 7–8% net yields, low rates – Mikayla Morkel-Brink

Jock of the Bushveld returns: AI brings a South African classic back to life

KZN architect walks from DBN to CTN to fund AI fix for SA’s 2.5 million housing backlog