TSX slips after index extends retreat from all-time high
The Trump 2.0 market era is teaching us something brutally clear: the US dollar is taking the bruises while everything else keeps dancing. Equities surge as if nothing matters, gold tears higher, and even the bond market is absorbing blows without a full collapse. But the world’s reserve currency, once the heavyweight champion, is suddenly the glass jaw fighter.
What makes this selloff extraordinary is that it’s happening despite foreigners still piling into US assets. They haven’t abandoned Silicon Valley’s AI-fueled capex boom; they’re just not willing to take the currency risk. They buy the stocks, but they hedge the dollar. They want to dance to the stock market tune, not endure the currency hangover.
For the first time in a decade, hedged inflows now swamp unhedged ones — more than 80% of equity inflows are wrapped in currency protection, and even US bonds are being bought with a hedge stitched on. Investors are still at the party, but they’ve moved closer to the exits.
This shift is not born from a sudden distaste for America’s growth story. It’s born from policy risk and institutional erosion. Rate cuts have only just restarted in the U.S., while Europe and others are closer to the end of their easing cycles. Normally, that divergence alone would explain dollar weakness. But this runs deeper.
Investors are quietly pricing in the possibility that Washington’s new brand of economic engineering — tariffs, political pressure on the Fed, and scattershot fiscal priorities — chips away at the credibility that once made the dollar unshakable.
The Fed’s own dot plot tells the tale. Chair Powell delivered a cautious 25bp cut, but Trump’s handpicked newcomer, Stephen Miran, wanted double — and sketched in another 125bp of cuts before year-end. With only two policy meetings left, that implies crisis-style slashing.
He won’t get it, but the message is clear: if Trump had his way, the Fed would throw monetary caution overboard. And markets don’t ignore intent.
Foreign investors saw this coming — they’d rather pay for the insurance than let political crosswinds shred their returns . The dollar’s slide is not just a technical adjustment; it’s a referendum on institutional credibility. You see the same vote of no confidence in the gold market, which has blasted to record highs this week as investors seek an anchor outside the U.S. framework.
Equities keep marching, blind to the fissures, because AI still sings the loudest tune on Wall Street. But beneath the music, the foundation is shifting. The dollar’s weakness isn’t about flows leaving the U.S.; it’s about faith leaving the U.S., and in markets, faith is everything.
For now, the buck truly stops with the buck.