The age of a treacherous, falling dollar

Subscribe to enjoy similar stories. Over the past year President Donald Trump has bullied America’s allies with tariffs, bludgeoned the Federal Reserve and treated the budget deficit as if it were just a distraction. Yet most asset markets blithely carry on as if nothing were wrong.

In the past 12 months the S&P 500 index of stocks has risen by 14% as investors have piled into artificial intelligence (ai). Growth in America is still the envy of the world. The ten-year Treasury yield, which should rise with the risk of inflation or default, is 4.3%, lower than when Mr Trump took his oath of office.

Yet look closely and the picture is darker and more complex. Since a peak in January 2025, the dollar has lost a tenth of its value against a broad basket of currencies. As a result, in foreign-currency terms, the performance of American assets has been poor.

When denominated in euros, for example, American stocks have barely risen over the past year. The currency’s fall partly reflects the narrowing of interest-rate gaps between America and the rest of the world. Yet American institutions are also a source of worry, as we report this week.

Spasms of investor panic have become more common, as in April 2025 after Mr Trump announced his “Liberation Day" tariffs. In those moments investors flee American assets, causing bonds, stocks and the currency all to fall in value. More common in emerging markets, that has occurred in seven of the past 52 weeks, about three times as often as in the previous decade or so.

When Mr Trump backs off his maddest ideas, normality returns. But the spasms offer glimpses of a topsy-turvy world in which dollar assets are no longer safe. It is an alarming prospect, given that the dollar is the world’s