You may have noticed some interesting and unprecedented discussions over the past few weeks surrounding the United States dollar, which has been the foundation of the global economy for decades.
The Greenback functions as the world's reserve currency, as well as the money of choice for buying and selling commodities like gold and oil.
Thanks to this reserve currency status, the US dollar has always been viewed as a safe haven. Indeed, those famously 'risk-free' assets – US Treasury government bonds – are priced in US dollars.
Yet something strange has been happening in recent weeks that suggests a threat to the reserve currency applecart: Donald Trump's tariffs.
As most investors would know, US President Donald Trump announced a series of wide-ranging tariffs on 2 April.
This announcement caused chaos within financial markets, evident by the huge dive that the share market took upon the announcement.
When there is an injection of fear into the global economy, investors have typically responded in the past by selling 'risky' assets like stocks and buying 'safe' assets like US Treasuries.
That's what happened in the global financial crisis back in 2008 and 2009, as well as the COVID crash of 2020.
In both of those periods, money flowed out of the stock market and into US dollars, pushing the yields on US government bonds down.
Except that didn't happen this month. Investors sold out of shares and also pressed the sell button on US government bonds and dollars. In their place, gold and government bonds denominated in other currencies, such as the Euro, were the havens of choice.
This, in turn, implies that investors' faith in the United States as a safe investment haven has been damaged.
Image source: Getty Images
Does a weaker US dollar threaten American shares?
Australians love buying US shares, and it's not hard to see why. The ASX is home to many wonderful companies, but none offer the size, scale, and global dominance of names like Microsoft, Amazon, Alphabet, and Nvidia.
So, should investors who currently own these shares sell them and return the capital to Australian dollars before the US dollar loses any more steam?
Well, given the unpredictability of the current US administration's policies, it might be tempting to think that US investments are worth avoiding in the short to medium term.
However, I think that would be misguided. Anyone would be forgiven for looking at what's happening in the United States and feeling anxious. Regardless of one's political views, it is arguably difficult to characterise the Trump Administration's economic policies as anything but erratic at best. And perhaps highly destabilising and damaging at worst.
But America is a country with centuries of history behind it. It has had erratic and unconventional governments before. Yet the country has maintained its financial supremacy on the world stage.
In these uncertain times, I draw inspiration from legendary investor Warren Buffett. Here are some quotes that Buffett has made over the past few years about avoiding investing in America:
For 240 years it's been a terrible mistake to bet against America, and now is no time to start. America's golden goose of commerce and innovation will continue to lay more and larger eggs. America's social security promises will be honoured and perhaps made more generous. And, yes, America's kids will live far better than their parents did.
We always live in an uncertain world. What is certain is that the United States will go forward over time.
So, I am taking Mr Buffett's advice and will not sell down any of my US shares just because there are some jitters about the Greenback. In fact, I am hoping to buy even more US shares with that cheaper US dollar. Let's see what Buffett has to say in his shareholder meeting next month.
