INSIGHTS
By
Kris Wild,
President & CIO
Jun 3, 2025
Markets surged, but the dollar’s crown is slipping. Legal drama, policy whiplash, and shifting capital flows set the stage. Is this a new bull—or just borrowed time?
Intro
May ended like the final act of a Shakespearean satire, boisterous, buoyant, and completely oblivious to the storm brewing offstage. With the triumphant return of major index’s, the Nasdaq and S&P 500 surged 9.6% (the best month it’s had since November 2023) and 6.2% respectively. Even the Dow, that plodding symbol of industrial America, managed to tack on 3.9%. And while the Russell 2000 index underperformed our expectations, it still managed to fall in with the pack and deliver a respectable 3.1%. One might have mistaken the month for the start of a new bull market, if not for the nagging feeling that this was less revival and more reprieve.
Our thinking has started to shift away from the easy relief rally days and started to look deeper into the plumbing. For even as the equity markets continue reaching for the more optimistic growth case, the signs of the scaffolding that supported the movement higher are starting to creak.
A federal court declared Trump’s reciprocal tariffs unlawful, briefly. A higher court quickly stepped in to say, “Not so fast.” Metals spiked, volatility curled around the edges of the VIX, and the White House, as ever, opted for ambiguity dressed as strategy. Meanwhile, traders had the growing sense that the market was running on fumes and messaging discipline, not macro fundamentals. Call it the “Party Until the Barn Burns Down” phase of the cycle, led by the exit of net dollar long positions, and movement of capital that continues into developed markets outside of the United States.
Dollar Dominance or Delusion?
For months, the dollar had worn its crown like an aging monarch: majestic from afar, riddled with problems up close. It had risen on real yield spreads, geopolitical premium, and the lack of a better option. But now the kingdom is showing cracks.
Morgan Stanley put it plainly: the dollar is likely to fall 9% over the next 12 months, thanks to slowing U.S. growth, peaking rate policy, and diminishing trade leverage. It’s a sobering note in what had become a celebratory chorus. The world’s reserve currency, once the ultimate arbiter of capital direction, is now looking more like the financial equivalent of a legacy newspaper, still quoted, but losing its readers.
This shift is starting to look like more than just a forecast, but a reflection of power leaking out of the system. As executive policy grows erratic and the courts toss legal hand grenades back and forth like they're playing badminton, the currency market has started sniffing weakness, not hegemony. The dollar isn’t falling because America is collapsing. It’s falling because the aura of predictability is, and this doesn’t bode well for attracting capital investment into our equity or fixed income markets. Even after the tariffs policy was put on pause in May and markets rebounded, both in equities and fixed income, it seems that structural damage both to the economy and global relations have endured and will continue to shape market forces until we get some real fundamental clarity.
Courtroom Drama, Policy Theater
Last week, (May 28, 2025), the U.S. Court of International Trade’s ruling against the White House’s reciprocal tariff regime was, for about 72 hours, hailed as a watershed moment for rule of law. Headlines sang. The yield curve flattened. Risk assets inhaled deeply. And then Thursday came about, and the U.S. appeals court stayed the decision, and the whole tableau felt more like legal kabuki than constitutional triumph.
Back to business as usual for the markets, with the message coming down very clearly: The tariffs will remain… for now. And with July 8 looming as the next formal review date, the only certainty is that markets will continue reacting to posture, not policy.
The Supreme Court, already signaling its distaste for broad executive overreach in unrelated cases, may yet deliver the final word. But if you’re pricing stability based on an eventual judicial ruling, you’re effectively trading patience in a world governed by impulse.
Copper, Steel, Gold and the Market's Poker Tell
You can tell a lot about the state of global nerves by watching commodities. Copper, the self-declared PhD in economics, surged more than 4% on renewed tariff chatter. Steel and aluminum prices ripped after the Trump administration suggested doubling levies again citing national security, the Swiss army knife of justifications .
Gold, typically the metal of last resort, rose as well because in 2025, even the dumb money knows that escalation comes via tweet and not by treaty or public communication.
It’s worth noting that commodities don’t wait for Fed transcripts or Supreme Court rulings. They price what traders believe will happen in the next 60 days. And right now, they’re saying: something’s coming. It’s probably not good. And it’s probably not priced in.
The Summer Setup: Heat and Drift
Let’s be honest, June is rarely the month where great fortunes are made. It’s a time for desk rotations, quiet repositioning, and the semi-annual rebalance. But this June feels unusually twitchy.
Why? Because we’re standing on the edge of this ripping bull run move that was built from three unstable layers:
1. Re-Peak positioning: Growth and cyclical positions led the charge back with AI allocations are maxed out post earnings season, the marginal buyer has chased the rally, and even after NVDA’s stellar earnings last week, the bellwether of growth failed to hold the 140 handle with it’s close on Friday, a troubling sign, but one to watch for this week. Who else is waiting to jump in now that forward earnings are back above their historical P/E norms?
2. Legal ambiguity and the TACO discount: No one can say with certainty what trade policy will look like in two weeks, so we learned to fade the noise and discount the tweet.
3. Executive unpredictability and Tariff Relief: This rally was ignited by the administration giving us a reprieve from the implementation of the harsher parts of its tariff plan. However, as we see the uneasy détente mature, the Trump administration seems unwilling to let its strategy be cornered or clarified. Prepare to be tested, they will not front run their intentions this time.
And then we have to confront July 8, the date when reciprocal tariffs are either lifted, escalated, or reimagined entirely. The TACO trade, Tariffs Are Coming Off, is looking a lot less certain, coming from the camp that was hailing the four-dimensional chess game as a stroke of genius.
Portfolio Positioning: Less Swagger, More Survival
We’re not sounding the alarm, but we are stepping back from the podium.
We’ve reduced our equity allocation from 66% to 33%. The rally has been rewarding, but it now rests on unstable pillars: hope, hubris, and headlines.
We’re raising cash to preserve optionality, and buying Treasuries, especially in the 2–5 year bucket, where roll-down and convexity offer ballast.
We’re adding gold, not out of panic, but out of probability: geopolitical assets tend to outperform when executive unpredictability rises and currency supremacy slips.
We’re still long equities. But now we’re long with an exit plan and a volatility overlay.
Conclusion: Heavy Is the Head That Wears the Crown
The U.S. once felt like the default steward of global capitalism: competent, accountable, transparent. But now? That crown sits less comfortably. The dollar’s reign is wobbling. Policy is turning improvisational. And foreign capital, once sticky, now feels curious about other parties and other parties are starting to look…fun.
We may still be the biggest show in town. But the world is wondering if it should start shopping for a new venue.
We’re not betting against the U.S. economy. But we are betting that complacency is mispriced, and that the next 30 days could be more volatile than the bout we grappled with in April this year, and as such require a smart exit strategy.
References
Barron’s: “U.S. Appeals Court Allows Trump Tariffs to Stay in Effect Temporarily”
Politico: “Trump’s Tariff Court Defeat Isn’t the End of the Story”
Bloomberg: “Supreme Court Rulings Against Biden Now Threaten Trump Tariffs”
CNBC: “Stocks Had Big Earnings Season Rally—History Shows June Could Be Rough”
ADMIS: “Copper Surges on Tariff Speculation”
CNBC: “Inside the ABUSA Trade: Anywhere But the USA”
Bloomberg: “US Aluminum and Steel Prices Surge as Trump Doubles Tariffs”
Wall Street Journal: “Gold Rises After Trump Threatens to Double Steel, Aluminum Tariffs”
Wall Street Journal: “ECB Set to Cut Rates Again and Keep Options Open”
Seeking Alpha: “The Market Will Declare Itself Soon: Lower Before Higher”
UBS Macro Monthly – June 2025
Bloomberg: “Morgan Stanley Sees Dollar Falling 9% on Slowing US Growth Bets”
