What is changing in markets
Deutsche Bank's FX chief, George Saravelos, pointed to recent stretches when tech shares and the dollar weakened at the same time as evidence that the greenback's classic haven role can wobble during an AI-led correction. He argued the dollar's risk profile looks more balanced than recent pricing suggests.
Why foreign exposure matters
Saravelos said overseas investors are currently financing the entire US current-account deficit, and their US equity stakes have mostly swelled because prices rose rather than because they added new money. According to Deutsche Bank, roughly 90 percent of the US stocks owned by foreign investors - a pool exceeding $20 trillion - represents appreciation rather than new purchases.
Currency hedging is part of the story. For much of the past decade, US equities and the dollar often moved in opposite directions, which made leaving currency exposure unhedged appealing. But when the shock originates in the US, he said, that relationship can flip positive, with the dollar sliding alongside stocks and deepening equity losses for foreign investors.
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The AI link and the tell to watch
Saravelos connected this year's concurrent increase in rates and equities to heightened expectations for AI-related capital spending. A shift the other way would be telling: he said a drop in US real yields alongside falling equities would signal those expectations are being marked down, adding, "A move lower in both US real yields and equities would be consistent with these expectations being downgraded." He emphasized he is not making a call on the AI ecosystem itself. As the note puts it, "The AI dollar is here."
Why it matters for your portfolio
In plain English, the dollar might not bail you out if an AI-driven downturn hits US stocks. If the greenback falls when equities do, the cross-asset relationships your portfolio assumed may not show up when you need them. Watching for US real yields and stocks to decline together is a useful signal of whether the dollar's risk-off reputation is fading.
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