Indiana Trust Wealth Management
Investment Advisory Services
by Clayton T. Bill, CFA
Vice President, Director of Investment Advisory Services

  • The U.S. equity market, represented by the S&P 500 index, rose 0.3% for the week.
  • The “debasement trade” narrative – that investors are seeking refuge in precious metals to shield themselves from devaluing currencies - is not supported by evidence across major asset classes.

The US dollar fell earlier this week relative to a broad index of currencies. When asked about the dollar’s decline on Tuesday, President Trump responded that he was content with its weakening. Those comments appeared to drive the dollar lower. The next day, Treasury Secretary Scott Bessent took to the airwaves and contradicted Mr. Trump, declaring that the US has always had a strong dollar policy.

Leaving aside whether a “strong dollar policy” is something the US government should promote, or whether Mr. Bessent’s statement is true, these are confusing developments. Movements in the foreign exchange value of the dollar are not easily explained. The CEO of PIMCO, Manny Roman, recently described the currency market as “white noise”.

Nevertheless, the dollar has declined against a broad basket of currencies since March 2025, while metals – in particular gold and silver – have soared. Many investors describe these moves as “debasement trades” - that is, investors are seeking refuge from currencies that they fear are being devalued by rising government debt and political uncertainty.

The debasement trade is a tidy narrative, which unfortunately is not supported when considering the performance of major US asset classes. Over the last year, the US stock market is up 15%, hitting another all-time high on January 27. The 10-year US Treasury bond yield has edged lower over this period, as well, meaning investors have been bidding bond prices higher. A strong stock market and modestly declining long-term interest rates are hardly evidence of a run on US dollar assets.

Mike Bird, contributor to the Buttonwood column for The Economist magazine, opines that one reason for this apparent discrepancy (strong US financial assets, weakening dollar) is that the dollar is not all that weak. The dollar’s real exchange rate (which accounts for inflation differentials between countries) is 13% above its 30-year average. Just how debased is the dollar, anyway? Not nearly as much as it could be, Mr. Bird concludes.

There may be other reasons for the dollar’s decline which are more arcane. For example, foreign investors have adjusted their hedging of their own currency exposure, which can cause downward pressure on the dollar in spot markets.

The recent unbelievable strength in precious metals has led to widespread pronouncements of currency debasement, yet these other factors are not addressed in those proclamations. Silver’s crash on Friday (down 28% - in one day) points to perhaps other reasons for recent price action in metals: market mechanics and leveraged speculation.

__________

IMPORTANT DISCLOSURES: All info contained herein is solely for general informational purposes. It does not take into account all the circumstances of each investor and is not to be construed as legal, accounting, investment, or other professional advice. The author(s) and publisher, accordingly, assume no liability whatsoever in connection with the use of this material or action taken in reliance thereon. All reasonable efforts have been made to ensure this material is correct at the time of publication.  Copyright Indiana Trust Wealth Management 2026.