Goldman Sachs: The USD still an attractive portfolio hedge; here is why?

Goldman Sachs highlights the enduring appeal of the US Dollar as a strategic portfolio hedge, pointing to the potential for unexpected deviations from current market forecasts. The firm underscores that the Dollar’s correlation with a conventional 60/40 portfolio mix has dipped to its lowest in five decades, making it an effective safeguard against unforeseen market shifts. Goldman emphasizes the cost-effectiveness of this strategy, considering the heightened cross-market correlations observed lately.

Key Points:

1. Dollar’s Hedge Value: The US Dollar remains a compelling option for hedging portfolios against potential market volatility or deviations from the anticipated economic trajectory.
2. Low Correlation with Traditional Portfolios: The near-historic low correlation between the Dollar and traditional investment portfolios enhances its value as a hedge, offering protection in diverse market scenarios.
3. Cost-Effectiveness: Given the current high levels of cross-market correlation, investing in Dollar-based hedges is seen as an economically viable strategy to mitigate risk.

Conclusion:

Goldman Sachs advises investors to consider the US Dollar as a valuable hedge within their portfolios, citing its low correlation with traditional investments and the economic feasibility of such a strategy. The firm suggests that the Dollar’s potential for protection against unexpected market movements or deviations from baseline predictions makes it an attractive option, especially in the context of current market dynamics.

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This article was written by Adam Button at www.forexlive.com.