Welcome to our August 2025 Viewpoints, a monthly bulletin from PDS Planning to our valued clients and friends. Our goal with each issue of Viewpoints is to provide you with a wide variety of perspectives on life and wealth. Feel free to share with others.
Dollar has Weakened, but Historically Strong
The weakening dollar has been a top story this year as we continue to learn what the impact of tariffs and trade will be. One result of a weakening dollar has been the outperformance of international stock over the US. The Vanguard Total US Stock Market Index (VTI) has grown 9.3% since the start of the year compared to the Vanguard All-World ex-US Index (VEU) growing an astonishing 22.0%! The uncertainty around the US economy has played a role in these lopsided returns, but the weak dollar has been just as important, if not more so. However, the chart below shows the long-term movement of the US dollar and, while weaker today, it’s still historically strong. It can surely continue lower, but America’s capitalistic approach and leading technology companies could set US stocks up for continued long-term success.
Sentiment Back to Normal
If you ever need confirmation that investors constantly give themselves whiplash, look no further than the chart below. From Panic to Euphoria, there’s always something to worry about or get excited about. Most recently (as we’re all aware of by now) have been tariffs. More specifically, the ‘liberation day’ tariff announcements back in April. Markets had one of the sharpest selloffs in history and investors panicked. Since then as trade deals have been discussed and struck, and the worst of the liberation day tariffs paused or reversed, the emotions have subsided, and market sentiment has back to normal.
Speaking of Tariffs – Latest Expectations
The orange bars in the chart below show the liberation day, April 2nd, tariff announcements. These were quickly stepped back after markets reacted negatively and new deals and rates were implemented. The bars in green show the completed deals while the blue bars show the latest expectations with most less than the April 2nd announcements. Time will tell the impact these have on markets, the economy, and trade in the US and across the globe.
The Magnificent 7 Is Still Relevant
Without the returns of the Magnificent 7 (Meta, Amazon, Apple, Alphabet, Nvidia, Microsoft, Tesla), market performance would have been much more muted. But without the performance of the Magnificent 7, market performance would have been much less volatile. During the initial market pullback in 2022, the Magnificent 7 lost nearly half of their value. As such, volatile technology stocks play an important role in diversified portfolios but are risky as standalone investments. Most of these companies have had their hands in the Artificial Intelligence pot and it shows – in both performance and volatility.
The Impact of AI and Jobs
AI has been a talking point for at least the last 12 months and many expect this trend to continue. Tech companies are all in and investors are flooding this area of the market with dollars, both in the public markets and private. It can be fun to play with programs like Chat GPT to create a funny picture or to even help write an email, but there is a worry that the continued development will take jobs away from people that need them. Data collected by JPMorgan seen on the chart below make the case, fortunately, jobs are mostly safe right now. They write, “AI agents are becoming increasingly useful, but even the best-in-class models can only reliably automate tasks that take humans up to 20 minutes to do.” The best-fit line is trending exponentially, but so far, so good.
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