Insight Investment: COVID-19 Could Trigger the End of the USD Bull Market

The US dollar [USD] will suffer as global growth rebounds from the Covid-19 crisis, potentially triggering the end of its bull market run, however any weakness will be muted in comparison to the multi-year downtrend that followed the global financial crisis. This is the view in new research, “COVID-19: The Trigger That Ends the US Bull Market?” published by Insight Investment, a global investment manager with $909bn under management1&2

Francesca Fornasari, author of the research and Head of Currency Solutions at Insight Investment said, “During the global financial crisis, the US dollar surged as investors fled to the deepest and most liquid market. But, as equities bottomed in March 2009, the USD peaked and embarked on a multi-year downtrend. As the global economy faces another severe downturn, caused by Covid-19, so the USD has moved to historic highs. However, this time around the underlying structural support of many currencies is much weaker than 10 years ago. We expect a more muted rebound and greater differentiation amongst currencies with a high beta to the economic cycle.”

Insight has identified four differences between the backdrop for currency markets in 2009 and 2020:

  • The current fiscal easing is larger than in 2009, but very different in nature. In 2009 public investment made up 31% of fiscal spending vs 7% now.
  • The broad level of leverage is higher. Emerging market debt has witnessed a 60% increase in leverage, a sharp contrast to early 2000 when emerging market leverage was declining.
  • China and globalization will play a more muted role in supporting the rebound. We don’t have the same tailwinds in global trade caused by China’s inclusion in the World Trade Organization in 2001.
  • Trend growth is lower, particularly in emerging markets. The decline has been most aggressive in emerging markets where total factor productivity is estimated to have fallen by 65%.

About Insight Investment

Insight Investment is a leading asset manager focused on designing investment solutions to meet its clients’ needs. Founded in 2002, Insight’s collaborative approach has delivered both investment performance and growth in assets under management. Insight managed $909 billion of assets as of June 30, 20201 across its core liability-driven investment, risk management, liquidity management, fixed income and credit capabilities. Many retirement plans in the U.S. are in the decumulation phase and are facing new pressures to ensure they have enough cash to cover their obligations. Insight builds unique outcome-oriented investment solutions to help plans manage risk, harness liquidity and maximise certainty. Insight Investment is owned by BNY Mellon, a global leader in investment management and investment services with $1.8 trillion in assets under management.

Insight takes responsible investment seriously. In our view, it is as an essential part of managing risk and deciding whether an investment is fair value. We were a founding signatory to the UN-supported Principles for Responsible Investment (PRI) in 2006 and have been systematically integrating environmental, social and governance (ESG) issues in our research process for more than a decade. Where we identify material ESG risks, we engage to better understand the issues. In 2019, Insight was awarded A+ ratings across most of the relevant categories in the PRI survey3, a reflection of its ongoing commitment to integrating responsible investment practices across all aspects of its business.

More information about Insight Investment can be found at:

1 As of June 30, 2020. Insight’s assets under management (AUM) are represented by the value of cash securities and other economic exposures, and are calculated on a gross notional basis. Insight North America (INA) is part of ‘Insight’ or ‘Insight Investment’, the corporate brand for certain asset management companies operated by Insight Investment Management Limited including, among others, Insight Investment Management (Global) Limited, and Insight Investment International Limited. Advisory services referenced herein are available in the US through INA only. Figures shown in USD. FX rates as per WM Reuters 4pm spot rates.

2 Insight’s assets under management includes assets managed for approximately 23 million pension plan participants across the world. Figures based on Insight’s clients reporting data to Wilmington’s ‘Pension Fund Online’ Blue Book as published in 2019.

3The PRI, launched in 2006, is an independent organization that works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. More details are available at Click here for further details.

Issued by Insight Investment Management (Global) Limited. Registered in England and Wales. Registered office 160 Queen Victoria Street, London EC4V 4LA; registered number 00827982. Authorised and regulated by the Financial Conduct Authority.

This document is for use by journalists and media professionals only.
This document is a not a financial promotion and is not investment advice. Unless otherwise attributed the views and opinions expressed are those of Insight Investment at the time of publication and are subject to change. This document may not be used for the purposes of an offer or solicitation to anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation.
This commentary is for general information only. It is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. It may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. Forecasts are not guarantees.
Past performance is not indicative of future results.
Investment in any strategy involves a risk of loss which may partly be due to exchange rate fluctuations.
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Emma Clarke
+1 973 735 3525

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