Dollar decline worsens losses for European investors

European investors in US stocks are facing significant losses as both the dollar and US equities decline. This situation is disrupting a previous trend where gains in currency helped offset stock declines. So far in 2025, the S&P 500 has dropped nearly 4% in dollar terms and over 8% when converted to euros. This downturn disrupts a cycle where increasing investments from Europe had previously strengthened the dollar, boosting returns for those without currency hedges against fluctuating rates. Peter Oppenheimer from Goldman Sachs pointed out that the combination of a falling dollar and dropping stock prices has worsened the situation for foreign investors. Recently, US stocks surged to new highs, but this year’s declining dollar has changed the outlook as concerns grow over US economic performance. The dollar has typically served as a safe asset during market stress. This perception encouraged European investors to enter the US stock market without hedging against currency risks, expecting the dollar to provide stability. However, this attitude is beginning to shift. The connection between the dollar and stock market performance is weakening. Some analysts predict that if this trend continues, European investors may start to reconsider their investments in US stocks without protecting against currency fluctuations. Recent surveys show that more European fund managers are reducing their exposure to US equities, which could lead to more selling pressure on the US market. Overall, analysts believe that if foreign investors sell off their US stocks, it could have substantial negative effects on the S&P 500, posing further risks for the market.