Everyone’s a Currency Strategist Now

Investing used to be so easy. You’d find an asset class you liked, and buy

it, and then, if you were right, it would go up, and you’d make money.

Not any longer. The problem is that the hot

attractive asset class, it would seem, is now foreign stocks. The $2.1 billion

Waddell Advisors Asset Strategy Fund, for instance, has just 25

percent of its holdings in US equities.

If you’re a dollar investor who’s bought foreign stocks over the past couple

of years, you’re smiling right now. Not only have those stocks increased in

value in local-currency terms, but the dollar has weakened at the same time,

turbo-charging your returns.

The problem is that you’re not only a stock picker any more: you’re layering

FX risk on top of stock-price risk. When both move in your direction, as has

been the case of late, you’re happy. But now you have two ways of losing

money, not just one: either your foreign stocks can go down in value, or the

dollar can go up in value. Investing is a more dangerous game, these days.

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