We have always maintained larger non-US positions in client portfolios than most asset managers. Clients have benefitted as a result of the slide in the value of the US Dollar. Recently, the dollar made a small gain in value against it’s major trading partners. We do not anticipate a continued rally in the US dollar because there are so many systemic financial problems in need of repair. Also, the further the dollar falls, the better it is for generating economic activity (in the US) via exports. This is only true to a point: once off-shore creditors get spooked by a loss in value of their US Federal Bonds, they may stop  buying.

Europe is the largest economy on the planet, and has been delivering profitable returns to client portfolios via international bond & equity funds. Earlier this year, several warning signs started to show that Europe’s economy was slowing in a dramatic fashion. As of August 14th, the Euro zone’s economy shrank at an annualized rate of 0.8% in the past quarter.

The largest economies in Europe are struggling, and now eastern Europe is starting to show signs of struggling with economic growth as well.  Eastern Europe has been an unanticipated boon to European growth over the past 10 years. But now inflation is too high, and out-dated infrastructure is restricting growth.