The US dollar has been the dominant force in global markets for the better part of the last few years. Back in 2022-23, the Fed’s aggressive rate hikes and waves of global risk-off sentiment pushed the dollar higher and higher. The DXY hovered in the low 100s, with every Fed speech and CPI print moving the needle. It was the trade that just kept working.
The US dollar has been the dominant force in global markets for the better part of the last few years. Back in 2022-23, the Fed’s aggressive rate hikes and waves of global risk-off sentiment pushed the dollar higher and higher. The DXY hovered in the low 100s, with every Fed speech and CPI print moving the needle. It was the trade that just kept working.
Energy stocks have been on a remarkable run over the past few years, especially after Covid-19. The S&P 500 Energy sector surged nearly 50% in 2021 and 55% in 2022, vastly outperforming the broader market.
Central banks are shifting gears. The Fed, ECB, and BoE have all turned more dovish heading into the end of 2025, and rate cuts are now widely expected. Inflation is cooling slowly but steadily, and bond yields are drifting lower. On paper, this should be a sweet spot for low-duration stocks: financials, energy, and defensives that lean on near-term cash flows rather than long-term growth stories.
The stage is set: inflation is finally cooling toward central-bank targets (US core PCE was ~2.1% in April), and major central banks are talking cuts. The Fed held rates in June 2025 but still pencilled in two quarter-point cuts this year.
