By John Stewart
Chief Investment Officer at Farmers Trust Co.

Week in Review: Monetary Hedges Unravel on Dollar Strength

The U.S. dollar’s demise has been prematurely predicted for quite some time now.

Everyone knows the reasons why the dollar is doomed – the $40 trillion or so in debt owed by the federal government; plus trillion dollar deficits as far as the eye can see; along with many trillions more in unfunded liabilities like Social Security and Medicare.

If everyone believes in a certain thing in markets, however, it makes it much more likely everyone gets fooled.

The dollar has been strong all year, and that strength has accelerated meaningfully in the past week.

Investors in monetary hedges like gold and bitcoin have been running for the exits, with gold down more than 25% from its January highs and bitcoin off more than 30% since the beginning of the year.

On the flip side, a strong dollar should be very helpful in bringing down inflationary pressures.

Every mutual fund, whether open-end or closed-end, index fund or active fund, has something called an expense ratio.

This is the approximate annual cost of owning the fund.

You’ll never see this on your statement; you won’t get a bill for it; and most people have no idea what it is on the various funds they own.

A quick Google search will turn it up.

Sometimes it’s worth paying a little extra for a well-managed active fund – just make sure you know what you’re paying so that you can keep it in mind when comparing your investment choices.

Looking Ahead: Quarter-End Rebalancing

With the end of the second quarter and first half of the year fast approaching, many money managers and funds are rebalancing their portfolios.

Expect to see some silly-level volatility taking place over the next few days, especially on the last day of the month.

I wouldn’t read too much into any of the moves the market makes next week, as they will mostly be driven by technical as opposed to fundamental factors.

Farmers Trust has been rebalancing portfolios mid-quarter for many years, rather than at quarter-end. We feel this avoids getting sucked into the silly price moves along with the rest of the rebalancing crowd.