The U.S. dollar has seen remarkable strength recently, leaving many investors wondering: Why is the dollar soaring, and how does this affect my portfolio? At WHVP, we believe in taking a global perspective when managing wealth, especially in today’s dynamic economic environment. Let’s explore the key factors driving the dollar’s performance, the state of global markets, and why diversifying outside the U.S. could be a smart move for long-term wealth preservation.

The U.S. Dollar: A Beacon of Strength—For Now

Over the past few months, the U.S. dollar has gained significant value, marking its strongest performance in nearly 30 years. This surge is tied to several factors, including robust U.S. economic growth, elevated interest rates, and strong market confidence. At a time when other countries are facing sluggish growth the U.S. dollar saw a strong uptick in demand from global investors.

But there’s a flip side. Just as the dollar can rise rapidly, it can also reverse course just as quickly. A 9% gain in one quarter is not sustainable long-term and could give way to sharp corrections. For U.S. investors, this means over-reliance on a strong dollar or a U.S.-centric portfolio can pose risks when economic conditions shift.

The U.S. Market’s Dominance—and Its Vulnerabilities

The U.S. stock market has been a powerhouse, currently making up a staggering 73% of the MSCI World Index. But does this reflect a truly global portfolio? Not really. In fact, the index could be more accurately described as “MSCI U.S.” with limited exposure to other regions.

This concentration mirrors a similar phenomenon in the 1990s when Japan dominated global indices. That trend eventually corrected—and so could the current U.S.-centric allocation. The leading U.S. companies driving these numbers—like NVIDIA, Alphabet, and Amazon—have seen valuations skyrocket, largely fueled by hype around technology and artificial intelligence. While these companies are innovative, their price-to-earnings ratios (P/E) are significantly higher than historical averages, signaling potential overvaluation.

By contrast, European and Swiss companies present compelling opportunities. Their valuations are more reasonable, often trading below their 5- to 10-year averages, with P/E multiples around 13–14 compared to the U.S. average of 23–25. For patient, long-term investors, these undervalued markets could offer a strong opportunity for growth and diversification.

The European Advantage: Why It’s Worth a Look

Europe has underperformed compared to the U.S. for decades, culminating in 2024 with the largest gap in performance since 1975. This underperformance has led European markets to trade at a 40% discount compared to the U.S., making them particularly attractive for value-focused investors.

Take Switzerland, for example. The country boasts one of the most stable economies in the world, with inflation below 1.2% and minimal GDP growth volatility. Unlike the U.S., where valuations are high and inflation remains a concern, Swiss companies offer strong fundamentals at more reasonable prices.

While European investments may require a longer time horizon, they can play a crucial role in balancing a portfolio, especially for those who value stability and capital preservation over short-term gains.

Currency Trends: A Double-Edged Sword

Currency fluctuations are another important consideration when diversifying internationally. While the U.S. dollar has gained significant ground against currencies like the Australian dollar, British pound, and Japanese yen, this doesn’t always reflect weakness in those economies. In many cases, it’s the strength of the dollar that’s creating the imbalance.

For example, Australia’s economy is heavily tied to China, which has faced economic headwinds. Yet, when comparing the Australian dollar to other currencies like the yen, it has held its ground. Meanwhile, the Swiss franc has demonstrated remarkable stability, as the Swiss National Bank prioritizes price stability over aggressive monetary policy changes. This makes Switzerland’s currency a reliable anchor in uncertain times.

The Importance of Global Diversification

For U.S. investors, the temptation to keep all assets in domestic markets is strong—after all, the U.S. has delivered impressive gains in recent years. However, history shows that no market stays on top forever. By diversifying globally, investors can:

• Reduce Risk: Balance out portfolio volatility by investing in regions less correlated with the U.S.
• Protect Against Dollar Long Term Devaluation: Position against future declines in the U.S. dollar.
• Access Undervalued Opportunities: Capitalize on reasonably priced markets like Europe and Switzerland.
• Safeguard Wealth: Benefit from jurisdictions with strong legal systems and financial privacy, such as Switzerland.

Think Strategically, Act Deliberately

When diversifying internationally, it’s essential to have a clear strategy. Are you seeking growth opportunities, asset protection, or currency hedges? Or are you looking to establish a nest egg outside the U.S. to safeguard against political or economic uncertainties? Whatever your goals, working with a trusted wealth manager can help you build a plan tailored to your unique needs.

At WHVP, we specialize in helping U.S. clients navigate the complexities of international investing. From identifying undervalued opportunities to mitigating risks, we bring decades of expertise to help you achieve financial peace of mind.

Take the Next Step

If you’re considering international diversification but aren’t sure where to start, we’re here to help. Schedule a free consultation with us today and explore how we can help you build a balanced, globally diversified portfolio.

Your wealth deserves the world—let’s work together to secure it.