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Morgan Stanley Says Bullish U.S. Dollar Signals 'Time to Sell'

While some economists suggest it's time to move away from the U.S. dollar, tariffs can play a huge role in the unforeseen GDP outlook for 2025.

What Happened?

While talks have grown over the power the U.S. dollar still has globally, a new report suggests it's time to move on.

Morgan Stanley’s analysts, led by David Adams, suggest in a report that investors have an overwhelmingly bullish approach towards the U.S. dollar.

Which in his view means… it’s time to sell.

Why it Matters

The investment banking company believes that the bullish viewpoint on the dollar is being fueled by data that points to the state of the American economy.

A big component of that data stems from the belief of new tariffs President-elect Donald Trump has campaigned on that will continue to drive the index value of the dollar upwards.

However, Morgan Stanley's analysts think many are overestimating the speed and timeliness of these possible shifts as it relates to U.S. trade policy once Trump takes office in January.

As Market Watch report, ‘While trade policy announcements could come relatively quickly, their implementation is likely to be slower, and their scope narrower than many investors seem to expect, with trade restrictions largely focused on China.’

Morgan Stanley’s analysts even suggest that investors could bet on increases in the values of Britain’s pound sterling and the Australian dollar.

Investors, along with consumers, are growing anxious for a return to lower inflation.

Many analysts worry the impact of tariffs could worsen the inflation position, rather than help make it better.

In a recent interview that aired Sunday with NBC’s 'Meet the Press,' Trump said he can’t guarantee that his tariffs plan on key U.S. foreign trade partners like China, Mexico, and Canada, won’t raise prices for American consumers.

“I can’t guarantee anything. I can’t guarantee tomorrow,” Trump said during the interview.

How it Affects You

In fact, if we look back at a report that showed during Trump's first presidential term, his administration imposed nearly $80 billion worth of ‘new taxes’ on taxpayers by levying tariffs on thousands of products in 2018 and 2019.

However, on the plus side, some economists predict that Trump's promise to impose tariffs on all imports from Canada, Mexico, and China would generate $1.2 trillion in tax revenue from 2025 through 2034.

They say it could reduce GDP by 0.4 percent, but that it would add nearly 345,000 jobs in the process. That’s a trade-off most would probably accept.