I've had quite a few questions about the US market and if it's "peaked". I find it hard to think the market has "peaked" when it hasn't actually gone up. If you measure the US market in Canadian dollars (first chart), Australian dollars, or Japanese yen, then the S&P is barely up 1% in 2025. If you measure it against the Kiwi or Sterling, it's flat, and if you measure it in terms of the Euro, it's actually down 5%. If you really want to get technical and measure it in terms of gold, the S&P is actually down 20%.

As you can see from the second chart below, the US dollar has been declining. These declines are actually quite good for the US economy, however, for foreign investors like us it negates some of the returns on US stocks. An American might feel like they are in a bull market, while every other investor outside of the US is still waiting for the S&P 500 to go up. The bigger question is whether or not the US dollar will continue to decline. That question is a little harder to answer.

Source: ThomsonONE. Vanguard S&P 500 Index ETFs [VFV and VOO-US], ICE U.S. Dollar Index [NYICDX-P]. Data as of Jul 22, 2025

Potential factors that could make the US dollar continue to depreciate:

• Monetary policy shifts – if the Federal Reserve lowers interest rates, then yield-seeking investors will decrease demand for the US dollar.
• Global economic recovery – stronger economies outside the US bolstering their currencies against the US dollar.
• Rising debt and deficits – US national debt is at an all-time high and deficits are continuing at record levels. This forces the Federal Reserve to issue more bonds, which creates downward pressure on the US dollar.

Potential factors that could make the US dollar appreciate over the next year:

• US economic growth – a growing US economy lowers unemployment and increases investor confidence in the US dollar.
• Global uncertainty – the US dollar is still the world reserve currency and during times of war or global uncertainty people tend to move there for safety.
• Trade and tariff policies – if the US gets their tariff negotiations done properly it could benefit the US dollar, though this could cut both ways.

We believe the US dollar may continue to weaken over the next few months; however, things change quickly. It should be an interesting couple of years!

I have also attached the July edition of Market Spotlight from our CIBC Economics team. In this edition, investment professionals discuss challenges and opportunities in the US and Canadian bond markets, and why self-inflicted wounds are weakening the US dollar.

As always, if you have any questions, please feel free to give us a call.

Have a great weekend.

Milan