Wolfe Research released a report discussing key investment themes for 2025, highlighting a stronger U.S. dollar and predicting a decline in long-term interest rates. The firm attributed the rise in the dollar’s value to various factors, including rising long-term interest rates, shifting expectations for the Federal Reserve, and the impact of former President Donald Trump’s win.
The report outlined the reasons behind the firm’s belief in the dollar’s continued strength. Wolfe Research had initially identified a stronger U.S. dollar as a primary investment theme at the beginning of the year. The firm’s stance remains unchanged, as they foresee the currency gaining further ground.
Wolfe Research also addressed the future of interest rates, particularly the U.S. 10-year yield, which has been primarily driven by the term premium since mid-September of 2024. The firm anticipates that rates will gradually decrease throughout 2025. This forecast is based on inflation moving closer to the Fed’s 2% target, which could lead to additional rate cuts, and a reduction in term premiums following a significant increase due to concerns over Trump Administration policies.
In light of the expected stronger dollar, Wolfe Research has provided a screening of S&P 500 companies that generate a high percentage of their revenue from outside the United States. These companies could potentially experience weaker growth due to the currency implications.
The report serves as a guide for investors who might be considering the impact of currency strength and interest rate changes on their portfolios, specifically targeting companies with significant international exposure that may be affected by these macroeconomic trends.
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