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Economic Trends · Aug 20th, 2025
What this video’s about
This month’s episode of The Market Share features Paul Gifford, Chief Investment Officer at 1st Source Bank, and Pete Cahill, Senior Portfolio Manager. The two explore key economic shifts that matter to today’s investors. They cover the recent drop in the U.S. dollar, the evolving role of the dollar in global finance, and changes in international trade.
How do these macroeconomic trends impact your portfolio strategy and global diversification? Let’s find out.
A weaker dollar, a stronger case for foreign equities
The U.S. dollar has dropped around 10% this year against a broad set of global currencies. While some headlines paint this as a warning sign, Pete offers a different perspective. For investors with international exposure, the drop may work in their favor.
“When the dollar goes down 10%, that’s like a 10% head start for foreign equities,” he explains. A weaker dollar makes international holdings more valuable when converted back into U.S. currency. It also makes foreign investments more attractive to American buyers.
Global diversification is key. Portfolios positioned to benefit from currency shifts are better equipped to capture these gains.
The dollar’s reserve status is changing, not collapsing
There is growing concern among investors about whether the U.S. dollar will continue to serve as the world’s reserve currency. The story goes back more than a century. After World War I, the U.S. became a major creditor to Europe. The Bretton Woods Agreement in the 1940s linked the dollar to gold. In the 1970s, global oil trade became dollar-based.
For decades, the dollar was dominant. That is still the case, but there has been a gradual shift. As Pete puts it, “It’s more of an evolution, not an end to the world reserve status.” Other countries are holding more of their reserves in non-dollar currencies, and the percentage held in dollars is trending down.
While diversification continues, the U.S. dollar remains a central player. Its influence is adjusting to a more multi-polar world, not disappearing from it.
U.S. trade patterns reflect years of supply chain changes
Global trade is also evolving, especially in how the U.S. manages its supply chain. Before the pandemic, China was the largest U.S. trading partner. That is no longer the case. In June, the top importer into the U.S. was Mexico, with $45 billion in goods, mostly automobiles. Canada followed with $30 billion, driven by oil and energy. China came in third at $17 billion. Vietnam, meanwhile, is rapidly closing the gap.
Pete credits this shift to decisions made over the last several years. U.S. companies began diversifying their sources and reducing dependence on any single country. These moves intensified during COVID-19 and are still shaping trade relationships today.
The result is a supply chain that is more balanced and less vulnerable to disruption.
Conclusion
Shifts in currency, trade, and global economic roles are not abstract theories. They shape the way investment portfolios are built and managed. Paul and Pete provide clarity on these complex changes and how they translate to real-world decisions.
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