Investor angst has been evident in the market over the past year, with certain historically out-of-favor assets (gold and silver, for example) surging higher.
President Donald Trump also seems to like what he's seeing, recently calling the dollar's value "great." Trump has long been a critic of the U.S. trade deficit with many countries, so a weaker dollar could help counteract that deficit, although there are always pros and cons of a strong and weak dollar.
Following these remarks, investors seem to think that Trump could continue to implement policies favoring a weak dollar, as the market now listens very closely to Trump's words. Here are three investment strategies to play a weaker U.S. dollar.
Official White House Photo by Joyce N. Boghosian.
1. Precious metals
As most investors have likely seen, precious metals have been all the rage. Gold has topped $5,000 per ounce, while silver has topped $100 per ounce. Other precious metals, like copper and platinum, have also performed well.
Now, things feel a bit meme-stock-like, as prices have risen much faster than many analysts anticipated, so there's likely to be intense volatility (see silver prices this week, for example). However, that doesn't mean investors shouldn't hold some precious metals, depending on their age and investment strategy.
That's why I think building a basket of precious metals to make up 5% to 10% of a multi-asset portfolio makes a lot of sense. An easy way to do this is to purchase abrdn Physical Precious Metals Basket Shares ETF (GLTR 1.21%), which allocates roughly 57% of capital to gold, 35% to silver, 4.2% to palladium, and 3.6% to platinum. Investors can also look to add a few more, like copper.
NYSEMKT: GLTR
Key Data Points
2. Vanguard Total International Stock ETF
Another way to hedge against dollar weakness is to gain exposure to currencies that will appreciate against the dollar. One way to do this is through the Vanguard Total International Stock ETF (VXUS 1.58%), which owns stocks in developed countries outside the U.S. and in emerging markets, which can be higher risk but also generate higher growth.
NASDAQ: VXUS
Key Data Points
Roughly 38% of the ETF's capital is allocated to European stocks; nearly 27% to emerging markets; and about 26% to companies in the Pacific. The three largest holdings are Taiwan Semiconductor, Tencent Holdings, and ASML Holding. These are companies focused on artificial intelligence (AI) and tech, but the fund also holds safer, more traditional companies like HSBC and Nestle. With valuations high in the U.S., investors may find more attractive valuations abroad as well.
3. Chevron
Oil can also be a good place to invest when the dollar is weakening, as oil prices often move inversely to the U.S. dollar. While oil prices have struggled, they are off to a good start this year, with crude oil trading up over 9% as of this writing.
Investors can certainly buy a basket of oil stocks, but one in particular that I find attractive is Chevron (CVX +3.15%). The stock has performed well, nearly doubling in price over the past five years, thanks to prudent management. The company has built out its operations in the Permian Basin, a part of the U.S., including West Texas and New Mexico. Chevron now produces 1 million barrels of oil per day in this part of the country.
NYSE: CVX
Key Data Points
Chevron has also been actively returning capital to shareholders through its high dividend yield, which exceeds 4%, and share repurchases. Chevron has bought back its own stock in 18 of the last 22 years. Management guided for $10 billion to $20 billion of annual share repurchases through 2030 at average Brent crude oil prices between $60 and $80 per barrel.
Chevron is also the best-positioned U.S. oil company to expand operations in Venezuela following the ouster of former Venezuelan President Nicolás Maduro. The company has existing operations in Venezuela and knows the landscape well, so it is not as risky for it to quickly expand production. Media outlets recently reported that Chevron is planning to boost crude oil exports to the U.S. from $100,000 barrels per day in December to 300,000 by March.
