Trump’s Dollar Déjà Vu: What an Uncanny Chart Shows About American Exceptionalism

A recent chart overlaid by LPL Financial’s chief technical strategist, Adam Turnquist, has been circulating in financial circles. The chart shows a striking symmetry between Donald Trump’s two presidential terms, with the US Dollar Index tracing a remarkably similar path in both periods.

On its face, the chart suggests that Trump’s policies are responsible for the dollar’s strong performance. However, Turnquist dismisses this notion, pointing out that Trump hasn’t spoken publicly about the dollar in recent years.

According to Turnquist, the initial rally in both terms was driven by a pro-growth agenda, including lower taxes and incentives for corporate America. As reality set in and reflation hopes began to fade, the dollar reversed course. This time around, though, there’s something more at play – the rise of the AI trade.

Foreign investors are clamoring to get exposure to US tech companies, driving a structural bid for the dollar. Turnquist notes that this demand is driven by the desire to own top-performing tech names: “You look at the AI trade, you look at the tech names and you want to own that… You sell your local currency to go fund dollar purchases of one of the hyperscalers or one of the semiconductor companies.” This steady flow of conversions is a significant driver of the dollar’s strength.

The Trump-era symmetry looks striking when compared to the dollar’s path under Joe Biden. The contrast between the two periods is stark – while Trump’s terms saw a distinct election-cycle shape, driven by sentiment and growth expectations, Biden’s term was marked by a Fed-and-inflation story.

This raises questions about what this chart really means for America’s economic exceptionalism. Is it evidence that our economy is truly outperforming others, or just a reflection of our tendency to chase the latest fad? The answer lies in understanding the structural drivers behind the dollar’s strength – and it’s not just about monetary policy.

When the US economy outperforms other economies, the dollar tends to strengthen. This chart can be seen as a testament to the US economy’s resilience, but we must be careful not to confuse correlation with causation. The AI trade and the tech sector are driving the dollar’s strength, but these trends have little to do with politics.

Understanding the structural drivers behind economic trends is crucial for investors and policymakers alike. It’s not just about monetary policy or interest rates – it’s about the underlying fundamentals that drive investor sentiment and decision-making.

As we move forward, it will be essential to keep a close eye on these trends and their implications for the dollar. Will the AI trade continue to drive demand for US tech companies? And what will happen if this trend reverses course? These are questions that policymakers and investors would do well to ponder – and one that this chart provides a fascinating glimpse into.

The dollar’s déjà vu is less about Trump’s policies than it is about America’s economic resilience. But we must be cautious not to confuse short-term trends with long-term fundamentals. The real test of our economic exceptionalism lies ahead, in how we navigate these structural shifts and position ourselves for a future that may look very different from the past.