7 reasons for a weaker US dollar and stronger international stocks

Invesco

Talley Léger

Research

18 Pages

Invesco examines how US dollar movements influence the relative performance of international equities, arguing that currency trends are often an overlooked driver of returns. The paper highlights that periods of sustained dollar weakness have historically coincided with meaningful outperformance of non US stocks, sometimes by double digit margins.

Key Takeaways

Dollar Drives Returns: A 10% decline in the USD has historically boosted international equity returns by roughly 7–10% relative to US markets.
Cycle Timing Matters: During the 2002–2008 dollar decline, international equities outperformed US stocks by over 40% cumulatively.
Valuation And Currency Link: Non US equities trade at ~30% valuation discounts, which combined with FX tailwinds can enhance forward return potential.
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