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The siren song of dollar weakness

A weaker dollar seems to be the answer to everyone’s prayers at the moment—or more specifically, investors want exposure to the exceptionalism of U.S. capital markets without the currency exposure that comes with it. From the BIS, via FXStreet:

Many investors still want to remain invested in US equities (belief in US exceptionalism is alive and well!), but at the same time, they see growing risks for the US dollar, not least due to the US government’s attacks on the Federal Reserve. A significant depreciation of the dollar could reduce the returns on the actual equity investment or even wipe them out entirely. So what is the solution? Hedging against dollar weakness. Ultimately, these hedges are effectively bets on a weaker US currency and, if widely adopted, create selling pressure on the dollar."

Equity Sector Rotation Chartbook, September 2025 - Running hot, and narrow

The September 2025 edition of the S&P 500 equity sector rotation chartbook can be found here. You can read more about the methodology and underlying assets here. This chartbook has been prepared with 1y total return, which is a departure from the first version with six-month returns. I honestly didn’t think about this when I pulled the data from Investing.com, as I normally work with 1y total return data for portfolio construction and the like. This shouldn’t make a huge difference to the main conclusions, though in some cases it might obviously shift the sectors around in the key diagram, compared to a six-month return framework. If you have a preference for future versions of this chartbook, let me know.

AI, Markets and Trading, Corporate Financeclaus vistesenSeptember 27, 2025equities, equity rotation, chartbooks

Things to think about #15 - Thomas Sowell & the post-literate society

I have been inspired, by listening to recent conversations on the Glenn Show, to delve into the writings of Thomas Sowell. This is a daunting task since the man has written a huge number of books, articles and essays. The Thomas Sowell Reader, however, seems to be a representative collection and a decent place to start. I am enjoying the reading experience so far. TS writes from a conservative, and fiercely pro-free market, perspective, at least in this the volume mentioned above. This invariably will put some readers off. But you’d be hard pressed to find a better example of punchy, yet eloquent, non-technical exposition of economics, social and political issues. The essay on the economics of discrimination and the small tract on “unfunded mandates” are particularly feisty and enjoyable.

Economics brain food

Glenn Loury is preparing to host a conference at the Hoover Institute, honouring the life and works of Thomal Sowell. To that end, he is hosting a number of conversations on his podcast. The first one with Emily Skarbek, associate economics professor at Brown University, and the second with Jason Riley, columnist for the WSJ, a senior fellow at the Manhattan Institute. They’re great conversations even if you, like me, are not familiar with the works and life of Thomas Sowell. TS, still going strong in his 90s, writes and thinks about core principles of economic thought, social life, individual responsibility and rights, and it is great to hear Glenn and his guests flex their intellectual muscles on these topics. I’d add to these two a recent Econtalk episode in which Russ Roberts sits down with his friend, and long-time guest on Econtalk, Mike Munger to discuss the question of what capitalism is.

We could all use a space online to unplug once in a while, especially in our current moment. For that purpose, you could do a lot worse than listening to the conversations above.

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