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The U.S. dollar’s exchange rate is critical in shaping financial asset returns for investors around the globe. It has a major impact on U.S. inflation and interest rates, powerfully impacts global commodity prices and is a key determinant of unhedged returns on international investments. So where is the dollar going? We forecast a moderate decline over the next 10 to 15 years.

Interest rate differentials—and real economic growth differentials—should narrow between the U.S. and other major economies, resulting in financial flows that should depress the dollar. Another drag on the exchange rate should come from large U.S. trade deficits that will tend to flood global markets with dollars to facilitate U.S. purchases of foreign goods and services. Policy intervention could further pressure the dollar, as the U.S. moves away from its long-held “strong dollar” stance in favor of making exports more competitive.

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ABOUT LONG-TERM CAPITAL MARKET ASSUMPTIONS

Our Long-Term Capital Market Assumptions are part of a deeply researched proprietary process that draws on in-depth quantitative and qualitative inputs from experts across J.P.Morgan Asset Management. We, and many of our clients, rely on the output as a foundation for multi-asset class investing.

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