The US dollar recorded its best annual performance since 2015, gaining nearly 7% in 2021 against a basket of major currencies, as measured by the US Dollar Index. We had previously explained in some detail why we had expected this very outcome throughout the past year, which was also the reason our Global Portfolio was heavily weighted in US stocks.
For a brief recap: Demand for the greenback was supported by robust recovery in the US economy — relative to the rest of the world — and corporate earnings, which, in turn, drew investors to US stocks. The Standard & Poor’s 500 index was among the best-performing indices in the world, up 26.9%, in 2021. The resurgence of Covid-19 cases in various parts of the world further spurred demand for the US dollar as a safe haven.
We think many of these factors remain in play in 2022. In fact, we think fallout from the pandemic has shifted, to a degree, growth momentum from emerging to developed countries. For a more in-depth discussion, please refer to our article in The Edge titled “The next big themes: Supply chain resilience and the end of low-wage as a competitive tool” (Issue 1394, Nov 1, 2021).
