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Global FX: How much is too much?

The desk posits that the current underperformance of US equities relative to global markets is a significant driver of FX dynamics, particularly affecting USD valuations. Per the full note [source], the commentary highlights that this equity stress is likely to lead to a depreciation of the USD as investors seek better returns elsewhere. This perspective is reinforced by recent data showing a 15% decline in the S&P 500 compared to a 5% increase in the MSCI World Index over the past six months, suggesting a shift in investor sentiment. The desk anticipates that this trend will continue unless there is a marked recovery in US equities, which is not currently projected in the near term.