Get Ready For A Falling Dollar | Tavi Costa

It will change everything

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The US dollar has been very strong for several years now.

Among other implications, capital from the rest of the world has flooded into US stocks as a result.

Today’s guest predicts that for many reasons, especially America’s need to get bond yields lower in order to make its debt more serviceable, the dollar will fall materially over the coming year.

If that happens, it will likely be unfavorable for US stocks, but add a tailwind to other assets, some trading at attractive discounts today.

So where do the best opportunities lie for investors?

To find out, we turn to macro and commodities expert Tavi Costa of Crescat Capital.

For his chart-tastic presentation, click here or on the video below:

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Adam’s Notes: Tavi Costa (recorded 2.26.25)

EXECUTIVE SUMMARY:

• Tavi argues that the U.S. dollar is significantly overvalued, having absorbed an outsized share of global capital flows over the past decade. Historically, when the dollar peaks, global equities and commodities outperform U.S. stocks, as seen in past devaluation cycles. Recent policy discussions and Federal Reserve actions suggest the U.S. may be shifting toward a strategy of deliberate dollar weakening, particularly through lower interest rates and rising fiscal deficits. Tavi also notes that the U.S. dollar index (DXY) has declined for five consecutive weeks, reinforcing his view that a major trend reversal is underway.

• The U.S. is currently paying 5% of GDP in interest on its national debt, a level Tavi argues is unsustainable in the long term. This forces policymakers into a position where lowering rates is not just an option but a necessity to avoid a fiscal crisis. He emphasizes that no other major economy is facing interest payments as high as the U.S. relative to GDP, making U.S. monetary policy increasingly unique in its need to suppress rates. If the U.S. fails to lower yields, it risks triggering an emerging-market-style debt crisis, further undermining global confidence in Treasuries and exacerbating liquidity concerns.

• Over the past two years, U.S. large-cap stocks have significantly underperformed international equities, a rare event over the last three decades. Tavi highlights that capital is flowing away from overvalued U.S. tech stocks into