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Could the US Dollar Lose Its Reserve Currency Primacy?

By Motley Fool Staff – Nov 6, 2018 at 3:11PM

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And what would happen to the value of tech stocks if it did?

Asking "what if" questions can be a useful way for people to mentally test things like investment strategies and risk tolerance. Asking, for example, "What if a bear market hit and cut the value of my portfolio by 25% or more?" might give you some ideas about how much risk tolerance you can stomach. But in this case, a Motley Fool Answers listener is looking for advice about a hypothetical that is a bit more far-fetched: What would happen to his tech-heavy portfolio if the U.S. dollar plunges so far in value that other nations stop treating it as a reserve currency?

Special guest Buck Hartzell, director of investor learning and operations at The Motley Fool, helps hosts Alison Southwick and Robert Brokamp tackle that question in this segment.

A full transcript follows the video.

This video was recorded on Oct. 30, 2018.

Alison Southwick: The next question comes from Harpreet. "I have a question about how stock prices of U.S. tech companies [especially the FANG stocks] might get impacted in the scenario of the U.S. dollar weakening and losing its reserve currency status. Do you think this is possible?"

Buck Hartzell: The short answer is anything is possible, but I think you're probably worrying a little bit too much. For those of you out there with reserve currency questions, the US is the world's reserve currency, which means other governments keep a lot of our money. You may have some insights that I don't. We have people here in Washington who work in the Federal Reserve. I just don't see that changing. That's not anything that I ever lose sleep over at night.

We're a bottoms-up kind of investment shop here for how we look at investment companies and stocks to invest in. I put almost no thought into what's going to happen to Netflix or Facebook if the U.S. dollar is not the world's reserve currency. I'm not worried about it. I don't even think about it that much and I don't think it's going to have that much bearing on any of those companies. If you like the companies and they're doing well hold them. Don't worry so much about the reserve currency.

Alison Southwick has no position in any of the stocks mentioned. Buck Hartzell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends FB and NFLX. The Motley Fool has the following options: short November 2018 $155 calls on FB and long November 2018 $135 puts on FB. The Motley Fool has a disclosure policy.

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