Episode 70
Understanding Macroeconomics in 2026: What a Weaker Dollar and Global Turmoil Mean for Investors Abroad
In cross-border investing, where you invest matters just as much as how you invest. This is especially true for fixed income. Although 2026 has only just begun, it’s already shaping up to be a busy year on the macro front. A weaker US dollar could impact portfolios more than ever, and bonds may not be the ideal place to take on currency risk. How are global macroeconomics, geopolitics, and currency dynamics shaping investment decisions for cross-border expats?
In this episode of Expat Wealth, Richard Taylor – dual UK/US citizen and Chartered Financial Planner – is joined by Brian Dunhill – founder of Dunhill Financial – to take a big-picture look at currency markets and explore practical ways to mitigate risk as the US dollar fluctuates. Despite geopolitical noise, markets have largely shrugged off concerns about the dollar’s currency cycle. Richard and Brian explain why they remain constructive on global equities, and what steps they’re taking in portfolios for expats who live, earn, spend, and retire across multiple currencies.
Richard and Brian unpack:
Why your investment strategy needs to match your global lifestyle. Where you earn income, where you spend it, and where you plan to retire should all influence your investment decisions: the currency denomination of your bonds, your asset allocation, and your liquidity requirements.
The good news: markets are holding steady. Despite political uncertainty and geopolitical tensions, inflation is moderating, and tariffs have had limited impact. Potential interest rate cuts could support equity markets, particularly if the US dollar weakens.
Be cautious with high-risk strategies. Leveraged approaches like yen carry trades, cryptocurrency, and exotic private investments carry significant risks. As an expat, stay informed about these strategies but don’t be drawn into them. Focus on liquid, transparent public markets where you have clear visibility and access to your investments.
—
Expat Wealth is supported by Plan First Wealth. Plan First Wealth is a Registered Investment Advisor serving fellow expatriates and immigrants living across the US on matters such as retirement planning, investment management, tax planning and non-US asset management.
—
Expat Wealth is affiliated with Plan First Wealth LLC, an SEC registered investment advisor. The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Plan First Wealth.
Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Plan First Wealth does not provide any tax and/or legal advice and strongly recommends that listeners seek their own advice in these areas.
ABOUT RICHARD:
Richard Taylor is a British expat, dual citizen (UK & US). Originally from Bolton, he now lives in Greenwich, CT, where Plan First Wealth has its head office.
As the firm’s leader, Richard launched Taylor & Taylor, now Plan First Wealth, and continues to fuel the firm’s growth. Richard is a Chartered Financial Planner (UK – CII) in addition to holding the IMC (CFA UK) and Series 65 (US – FINRA).
Connect with Richard on LinkedIn
TRANSCRIPT:
Brian Dunhill:
[00:00:00 – 00:00:53]
But the one thing that we do differently, Richard and myself, we have to consider the currencies. If we’re a Brit in America, you have to consider whether you’re going to be living on dollars or pounds. If you’re an American in Britain, same thing. And the situation might be different for each and every single part of the financial plan. And that’s going to be the big part that we’re going to be talking about. Currencies, currencies, currencies. I don’t know one company that hasn’t increased their productivity because of AI. We’re no longer arguing about whether we should use AI. We’re arguing about which AI to use and which one’s the best for each different situation. We’re looking at tractor companies and John Deere using AI to become more productive on farms. Every company is going to be more productive now in this new industrial revolution, and that’s just going to increase profitability going forward.
Richard Taylor:
[00:00:53 – 00:03:37]
Let’s put this in terms that the most important for our expat clients in America, get your European holidays in now. Yeah, go and spend money in Paris and Rome or wherever you want to be now, while the dollar is still relatively strong. Welcome to Expat Wealth, a Plan first wealth podcast dedicated to helping ambitious expatriates in America and Americans overseas thrive. I’m your host Richard Taylor and Plan first wealth is the business I founded and run today and we work with successful expatriates, immigrants and internationally minded Americans to make the most of their opportunity and avoid the expat landmines. First, a quick disclaimer. While Plan First Wealth LLC is an SEC Registered investment Advisor, the views and opinions expressed in this program are those of the speakers and do not necessarily reflect the the views and positions of Plan First Wealth. Information presented is for educational purposes only. Now, if you aren’t already receiving our emails, please go to our website planfirstwealth.com and sign up there. It’s free and you’ll be notified every time we drop a new episode and so much more. Okay, let’s get back to this week’s show. Welcome back to Expat wealth and welcome to our inaugural episode, our first attempt at the new show that we are calling Macro Aggressions, which is a name I absolutely love. Can’t take credit for it. Bright was Brian’s idea and and Chachi BT helped me. But essentially what we’re going to try and do here is we are a podcast for helping expatriates us connects expatriates Thrive we’re also the firm that, that is behind this plan. First wealth is a wealth manager. And most of what we talk about is like tax and immigration and on all this, on all this great stuff. But we’re also, we also need to talk about, we all, we think we need to talk about investments and managing money because that’s what we do day to day. So that’s what this show Macro Aggressions is going to be about. It’s got, it’s going to be about a, a look at what’s going on in the world and how that might affect the way that we manage money. So to help me do that, I wanted to bring in my, my good friend, my own mucker, Mr. Brian Dunhill of Dunhill Financial. And I wanted to bring Brian in because anyone who listens to this podcast know that, knows that Brian and I already have a relationship. Our firms have a relationship. But also I am myself and my firm, we work with expat, mainly with expats across America. Brian is an American dealing with Americans in the uk, Europe and further afield. So we kind of mirror each other, dovetail very nicely a lot of what we encounter, the same sorts of issues. I thought it’d be a great person to come on and, and help me with this show. So. Brian. Hi mate.
Brian Dunhill:
[00:03:37 – 00:03:46]
Wonderful to see you, Richard. I, I think we’ll be talking about everything in Mirror Images today. So if I say something backwards, apologies, Richard, you’ll just correct it, right?
Richard Taylor:
[00:03:47 – 00:03:47]
Right.
Brian Dunhill:
[00:03:47 – 00:03:48]
Okay.
Richard Taylor:
[00:03:48 – 00:04:06]
I’ll be on, I’ll have my wits about me for that. So look Brian, for people who are unfamiliar with you, first of all they need to go back and listen to all the, the, our, our bank of episodes. So people get on that. But I tell you, just introduce yourself.
Brian Dunhill:
[00:04:07 – 00:05:31]
Brian Dunhill. Dunhill Financial unoriginally called that. We deal with Americans here in the UK and Europe and we have our robo advisor, DF Direct, which helps clients of any size with no minimum and a nice low cost. So, so everything that we do in our management style you can adopt inside of your own portfolios. We’ve loved working with Richard and his clients to essentially make sure that we consider the big difference between portfolios for cross border individuals versus those big investment shops that do a wonderful job. But the one thing that we do differently, Richard and myself, we have to consider the currencies. If we’re a Brit in America, you have to consider whether you’re going to be living on dollars or pounds. If you’re an American in Britain, same thing. And the Situation might be different for each and every single part of the financial plan. And that’s going to be the big part that we’re going to be talking about. Currencies, currencies, currencies. And I think 2025, that was the big topic that we had. We, we’ve had year after year after year of dollar strength and now all of a sudden we have an administration. We’re not going to do a political podcast here.
Richard Taylor:
[00:05:32 – 00:05:37]
Step away from the podcast. Can’t really get away from it though, in this day and age. Right?
Brian Dunhill:
[00:05:38 – 00:05:43]
Come on, first week of the year, you know, all of a sudden everything changes, all politics.
Richard Taylor:
[00:05:44 – 00:05:46]
Well, nothing’s happened this year. At least we can say that.
Brian Dunhill:
[00:05:47 – 00:05:51]
Oh, Jesus, cut that part out of it, dude.
Richard Taylor:
[00:05:51 – 00:05:52]
It’s exhausting.
Brian Dunhill:
[00:05:52 – 00:05:53]
I don’t think I should say that.
Richard Taylor:
[00:05:53 – 00:05:54]
It’s exhausting.
Brian Dunhill:
[00:05:55 – 00:06:22]
In preparing for this, we literally have had to do a daily rendering of, hey, has something new happened in Iran? Hey, what is changing down in Venezuela? Hey, what’s escalating over in Yemen? Hey, is the administration going deeper into Cuba or Mexico or Greenland? This is going to be a big moving year, but that doesn’t mean it’s moving the markets in bad ways in any way.
Richard Taylor:
[00:06:22 – 00:07:58]
Just before getting, just before I get into the details. Right, let’s just. So this is. We both run investment firms. We manage money for clients. Expat wealth is not an investing podcast. There are some great investing podcasts out there. And you know, frankly, we’re never going to compete with that. I don’t want to compete with that. But what we do to your point is slightly different to 99% of firms or all our clients, mine and yours are cross border, they have cross border considerations. Even the ones who have left and are never ever going back. There’s still family ties, financial ties. It’s, it’s, it’s inescapable. And we both know the, the life for an expat is inherently unstable. And I don’t mean that in a negative way. I mean, I can’t tell you the amount of clients who have, who when I first started working them, told me, this is it, I’m here for good, I’m never going back. And now they’re in the UK or Portugal or somewhere else and things change on a dime. And I think that’s a wonderful thing. Our clients are mobile people who are unafraid and, and, and, and do take these big, big moves. I love it. But the point I’m making is we, we have the regular kind of like prism of Investing, but then we have an entire new prism which we’re always looking for, which is like everything we do needs to be flexible, needs to take into account currencies. So our purpose with this show is to talk about what’s going on in the world, talk about how it might affect clients from an investment and an economic perspective, but always try and do it through a cross border perspective. And I just think you and I coming out this very, very similar, very, very similar clients. Different, but similar. And hopefully we can, that’s, that’s, that’s what we can achieve through this show.
Brian Dunhill:
[00:07:59 – 00:08:30]
Absolutely. And that’s, that’s why Richard might always sound like the dollar is better and I might sound like the pound is better because that’s where my clients are versus where your clients are. But it’s more the significance of where we’ll use the money, where you pay your bread is, is where you don’t have to worry about that currency risk, which is how we’re always looking for a free lunch as economists. Right Richard? And the free lunch comes from diversification and reducing our different risks and reducing currency risk is going to be that best part.
Richard Taylor:
[00:08:30 – 00:08:32]
Are you more pounds or euros?
Brian Dunhill:
[00:08:32 – 00:08:39]
Oh, I live on pounds, so I think significantly on pounds, the majority of our clients are in euros.
Richard Taylor:
[00:08:39 – 00:08:40]
Really?
Brian Dunhill:
[00:08:40 – 00:08:41]
So it’s that mix.
Richard Taylor:
[00:08:41 – 00:08:52]
Yeah, yeah. And this is good because whilst we’re mainly dollars, our clients do go back and they predominantly go back to the uk, but they also go back to Europe, as you know.
Brian Dunhill:
[00:08:53 – 00:08:53]
Absolutely.
Richard Taylor:
[00:08:54 – 00:09:02]
So we share some clients who did exactly that. So these are the three main currencies for us as well.
Brian Dunhill:
[00:09:02 – 00:09:18]
Absolutely. And globally we’re having to think about more currencies than we ever have before. I know we want to talk a little bit about the yen later on. That used to be just of devaluing currency and now we, we have to take it into the equation.
Richard Taylor:
[00:09:20 – 00:10:03]
When we get to the end point. You want to talk about the end. I know nothing about the yen, so I’m going to lean on you heavily for that part. So let’s, let’s put this into context. Those of you who don’t know. Brian puts out, I think it’s a fantastic monthly newsletter which is quite. Investment, investment. There’s lots of, there’s other stuff in there as well. But I, the main body, the main theme of this is like an investment thesis anal. And I, I said to Brian, look, look, this is, I, this is great, I enjoy this. Let’s turn this into a show. Evo la. Here we are. So that’s Gonna people go to the website, Dunhill Financial, sign up to it and we’re going to use that kind of as our base to, to, to, to talk about these themes. So you know, let’s go.
Brian Dunhill:
[00:10:04 – 00:11:16]
Perfect. Per. This year already being a flashpoint for, for lots of activity, you think. And every year where Trump is president is going to be interesting and let us live in interesting times. At least we are, we are in that. The hot topic has been Venezuela. There’s been a lot of surrounding talks with, with Greenland, Yemen, Iran definitely has been the flashpoint the last couple of days. But Venezuela is definitely the market mover. The interesting part when we look at oil prices hasn’t significantly shifted things. This is a very interesting part because Venezuela, one of the big claims is as they kicked out the American energy companies back in the 1970s, that this was going to open up a lot of opportunities to get oil back to market. The longer the time frame has gone since the removal of the President could. Do we call it the removal of the President or do we call it.
Richard Taylor:
[00:11:16 – 00:11:17]
I don’t know what you call it.
Brian Dunhill:
[00:11:19 – 00:12:21]
He’s gone whatever we want. Well, he’s in New York. You know, they, they confused, they confused some of the Ice Capades. You know, all of a sudden it’s now a, a take a Latino leave, a Latino program between America and Latin America. I don’t know if we’re allowed to say those types of things. That’s not said with any negativity. But essentially we’re looking at potentially 1 million, 1 million barrels of oil per day. And when we’re looking at that size and scope, it could change the landscape of oil prices. If we look back on a five year trajectory, we were about $60 a barrel for oil. Then we have the invasion of Ukraine. We spiked up to $120 a barrel as changes in the system took place. Now over the last five years, we’ve come right back down to $60 a barrel. It would probably take three to five years to get a lot of this oil in the pipeline, if it could even get into the pipeline.
Richard Taylor:
[00:12:21 – 00:12:29]
And a lot of cost as well. Right. Because I understand the oil quality is not that great and it needs a lot of refinement and all this good.
Brian Dunhill:
[00:12:29 – 00:13:19]
Stuff, not the easiest way to access it, etc. The 22 oil majors, they’re not really taking too, too big of an active role in saying this is definitely not what we’re going to do. So we’ll have to, we’ll have to see. But that’s, that’s to where we haven’t seen oil prices drop significantly or increase significantly because of the actions. And we’ve seen volatility on the vix. The stock markets derivative plays hardly move, which in such a geopolitical shift to not see a big action in the stock markets or in the oil markets, it’s kind of business as usual. Iran looks to be the exact same aspect. So the geopolitics are not affecting the markets in as big of ways as we might have expected.
Richard Taylor:
[00:13:20 – 00:13:51]
Brian, do you not find, do you not find that the market just seems to be shrugging everything off at the moment? The equity market, it’s shrugging off this criminal subpoena for Powell, threatening the Fed independence, it’s threatening, it’s shrugging off Greenland, it’s shrugging off, like you say, Iran and Venezuela, which I’m not sure if that’s a good thing because it’s showing resilience or if it’s a bad thing. It’s just showing Pollyanna ish kind of denialism.
Brian Dunhill:
[00:13:52 – 00:14:56]
Well, essentially, if we would have looked at the biggest risk last year, we were kicking and screaming the tariffs are going to impact inflation. Right. We’ve gotten to the end of the year and the beginning of this year and it’s looking like inflation’s coming down. That, that was our biggest canary in the, in the coal mine last year. Now, when we look at all these other factors, are they going to affect the earnings of S&P 500 companies? AI seems to be helping many of the big Batman stocks, or Mag 7, whatever we want to call them, so significantly when it comes to earnings that even Trump can’t affect that even the geopolitics can’t affect that. I looked it up this morning. What, what happens if oil prices drop down to $30 a barrel? Because all of a sudden we have so many more barrels coming on online because of Iran and Venezuela. The S&P 500 is only made up of 3% oil and energy companies.
Richard Taylor:
[00:14:57 – 00:14:58]
3%.
Brian Dunhill:
[00:14:58 – 00:15:10]
3%, exactly. We keep talking about the overexposure of AI and the Mag 7 inside of the S&P 500, but we forget that that has the exact opposite effect on the rest of the actual allocation to.
Richard Taylor:
[00:15:10 – 00:15:33]
The stock market does not tell you just how things change. So, I mean, 30 years ago, 50 years ago, certainly, but 30 years ago it would have been dominated by oil, I bet, and then financial stocks and now tech. Just you, we think, you think what we all want to be all. But, you know, you think what the tech stocks will dominate forever. They Won’t. Something else will, will arise, it will.
Brian Dunhill:
[00:15:33 – 00:16:02]
Prevail, it will switch around. And that’s why we want a diversified portfolio. That’s, you know, it’s going back to how do we get a free L. Diversification. You know, this is, this is the conversation we’ve been having of how do we keep diversified inside of our portfolio. But I, I think that’s one of my main theories of why it’s not impacting the stock market in big ways is these 22 oil companies in the United States, they’re not that big. They’re not that big. If, if we build ESG portfolios, it’s even smaller.
Richard Taylor:
[00:16:02 – 00:16:03]
Yeah.
Brian Dunhill:
[00:16:03 – 00:18:05]
But it’s not going to move the needle in, in big ways. And then on top of that, any of these effects are going to take three to five years to actually impact the global economies. But it’s more likely to reduce inflation, which was our big fear, our big canary in the coal mine last year. And going back to your point on Powell, Trump is going to bully. That’s what he does right now when he’s bullying Powell. We know the net effect of anything that happens. There will probably be a reduction in interest rates, which is going to be conducive to the overall stock market. But we’re not talking about huge rate cuts because we’ve already had some and we don’t have a perfect condition when it comes to everything else. But what we have to remember is rate cuts will probably lead towards a devaluing of the US Dollar. Right now, we have higher rates in the United States than we have in Europe. We have closer to equal rates between the U.K. and the U.S. if interest rates go down on the U.S. side, it’s less attractive to keep money in dollars when we’re talking about large institutions. If you have these large tech companies that have $100 billion in euros, they can shift it into US dollars, buy a forward contract for those costs that they need for less than 10% of that value. So as long as that differential is bigger than the 10% differential that it would cost them to hedge that currency risk, money’s going to stay in the U.S. as that comes down, the U.S. dollar will weaken. That’s the honest truth. And that’s how we need to think about these things having a domino effect inside of our portfolios. That’s where our head is at the stock market, not too afraid of it. The bond market will more impact the currency market than anything else.
Richard Taylor:
[00:18:06 – 00:18:08]
What are you doing about this, then?
Brian Dunhill:
[00:18:09 – 00:19:33]
In a big way, we’ve shifted A lot of our fixed income outside of US Dollars, we’re buying local currencies. When it comes down to it, we have a, we have a slew of, of individual bonds that are investment grade, both in Europe and the UK that avoid all that currency risk. So when I think of if you owned a one year CD last year in US dollars, if you were in euros with the dollar going down 10%, you would have had a net effect of negative 5%. Right. So therefore if you’re living in Europe, even though you’re maybe earning 3, 3.5% on a short term bond in euros versus the 4, 4.5% that you might get in US dollars, you don’t have that currency risk. You and I, we, we deem that our fixed income should be the risk free asset inside of our portfolio, that we want to take our risk in our stocks and we, we want to avoid the risk in the bonds. So if we’re trying to grab that higher yield, if we’re trying to be yield hogs and we’re taking that extra yield, but we’re losing it on the currency because we buy our bread in euros or pounds, we’re actually missing that big point. And that’s one of the big things that differentiates your firm and my firm. Where we need the assets should be how we’re investing those assets.
Richard Taylor:
[00:19:33 – 00:20:07]
Yeah. Especially important for fixed income because to your point, you can just, you can, you can wipe out any fixed income return through the currency movement. I mean, obviously the opposite can be true as well. You can magnify it, but that’s that and that sounds good, but it’s not because to your point about why you have fixed income, you have it there as like a, we call it the ballast. You know, it’s, it’s, it’s, you need that to be safe and dependable and great. Obviously, if it’s going to, if it’s going to move, I’d rather it move positively. But if it, if that happens, it’s not, that’s not playing the role, it’s intended for the role. If I want risk, I’ll go to the equity market.
Brian Dunhill:
[00:20:07 – 00:20:28]
Absolutely we will. I, I sometimes do take risk inside of the currency markets intentionally from the vantage point that for instance, sometimes you can go to the long end and you know exactly what a currency is trying to do. The problem right now is that’s the US dollar.
Richard Taylor:
[00:20:28 – 00:20:31]
Brian, explain to people what you mean by that. You go to the long end.
Brian Dunhill:
[00:20:32 – 00:21:49]
So in other words, if all of a sudden we have cash, all we have is an FX risk. Mm. If I own a one year bond, well, I have short term exposure. But if I have a 30 year bond, I’m going to move in proportion with what interest rates are doing, but it’s going to be extended further. So all of a sudden, if interest rates go down, all of a sudden the value of my bonds are going to go up further because I’m further away from the fulcrum. Right. So if we feel that a currency is going to go down in value and that’s going to be driven by interest rates going down, essentially, sometimes we’ll balance out long term bonds against that currency because we would expect better values. This is when we end up buying emerging market debt. Emerging market debt did incredibly well last year. At other times, we want to short some of that exposure. So right now we know exactly what the Trump administration wants to do. We don’t know how they’re going to do it all the time, but essentially they want to devalue the US Dollar to make themselves more competitive when it comes to exports. They did a good job last year. 10% to most global currencies and probably 5 or 6% this next year.
Richard Taylor:
[00:21:49 – 00:22:09]
I remember you saying this to me last year. You think this is a explicit strategy? They’re trying to devalue the dollar. I mean, with the dollar, what got pretty damn strong. I mean, it was on a 15 year. Don’t they go in cycles, these things? They’re 15 year ish cycles. And we’re right at the very end, 15 year strengthening cycle. And it got pretty darn strong.
Brian Dunhill:
[00:22:10 – 00:22:39]
Absolutely. Since the 1970s, since we got off the gold standard, we’ve had 10 to 15 year cycles of dollar strength, dollar weakness, Nixon and Reagan, which, let’s just put it in the camp. Trump looks up to the two of them. As Republican leaders, both made efforts to devalue the US Dollar and it outlasted their presidencies. So we shouldn’t just think of the end of Trump’s term being the potential end of the devaluation of the US dollar.
Richard Taylor:
[00:22:39 – 00:22:53]
First of all, it’s bigger than a president and you set in motion the forces that move a currency are myriad and massive. And once you get that momentum, that whole thing rolling, someone can’t just come in and turn it on a dime.
Brian Dunhill:
[00:22:54 – 00:23:21]
Absolutely, absolutely. And it is a momentum trade. Just because Trump is out in three years doesn’t mean that the relations between the United States and. Oh, you ruined my day with that comment, Richard. The all the inappropriate things that I could say to respond to that that I will not include in this podcast.
Richard Taylor:
[00:23:21 – 00:23:26]
We need to wonder if do we leave this, this part in or not? Afterwards, we’ll come back to that.
Brian Dunhill:
[00:23:27 – 00:23:59]
You mean he could be gone before the end of the presidency? See, I want to turn it down to a positivity in my mind. Apologies, Richard. Essentially, no matter what happens with the Trump administration right now, there is, there is a frustration with American policies and there’s a lack of trust in those aspects. And we’re coming off a high, high value, like you astutely pointed out. So when you come off a very high value, you have a lot further to come down. And that’s where the US Dollar is at this point in time.
Richard Taylor:
[00:23:59 – 00:25:20]
I’m excited to announce that Expat wealth has its first sponsor, the Global Financial Planning Institute. The GFPI exists to provide education, community tools, resources and ongoing research for financial planners and other advanced financial professionals working with international and cross border clients in the US And Americans abroad. I’m a GFP Institute fellow and I’ve put all our employees through their GFPI programs when they join us. I’ve met some great people. I’ve learned a ton. It’s a genuine community of internationally minded folk doing their best to serve their clients properly and critically sharing what they know in the oftentimes challenging and ambiguous US Cross border environment. And as anyone in this sector will tell you, you’re always learning. So if you work with international clients and, or Americans abroad, or if this is an area you’re looking to get into, check out the gfpi@www.gfp.in stute you will be glad you did and I hope to see you there soon. Well, let’s put this into, let’s put this in terms that are the most important for our expat clients in America. Get your European holidays in now. Go and spend money in Paris and Rome or wherever you want to be now or while, while it’s, while the dollar is still relatively strong.
Brian Dunhill:
[00:25:21 – 00:25:40]
What was your line from the last podcast? That America is the business place. Japan’s the nursing home and, and Europe’s the museum. Come visit our museums. Yes, we can definitely, yeah, we can definitely use it. They’re beautiful, they’re worthwhile. And, and the cheap place to go, naturally is Japan right now. So enjoy the nursing home.
Richard Taylor:
[00:25:40 – 00:25:52]
Okay, listen, let’s, let’s, should we, let’s, let’s move on to that. Let’s talk about the, the yen carry trade. This is, this is over to you. I, I, yeah, I remember this blowing up Last year a little bit, but I haven’t haven’ it since.
Brian Dunhill:
[00:25:53 – 00:27:17]
It, it is, it is the canary in the coal mine that we’re, we’re constantly talking about because essentially in simple terms there, there’s always a carry trade, there’s, there’s a place that you can borrow for cheaper and then you can, you can go ahead and invest the money in a more of a risk free route in, in some form of fixed income while hedging those, those aspects. This is not something that we do for our, our retail clients. This is something that Wall street does. You know, the investment bankers, the fixed income traders, they run carry trades all the time now as interest rates got into the negative effects and now they’re in, in the low yielding percentages in the United, in Japan essentially that has been the hub of a lot of lending. And the problem becomes as interest rates go up, as they finally manufacture some inflation, as those loans get paid off, it’s easy for it to slowly come out, but it can get busheled up as it comes back in the door and it presents a potential black swan risk. In our vantage points, leverage always seems to be the thing that brings about big declines in the markets. If we think about the Great Depression, if we think about 2008, it’s always leverage that, that comes into place and this is where the leverage is coming.
Richard Taylor:
[00:27:17 – 00:27:55]
That’s exactly what Andrew Ross Orkin is going around talking about now. He’s just written a book. He’s, he’s awesome and he’s just written a book, 1929. He’s a guy who, I’m sure I know you know this, but I’m just so everyone else knows he wrote Too Big to Fail. He’s a New York Times. He was, he’s many things. He’s a producer on Billions a show. He’s a fantastic journalist. He’s written a book on 1929 which I just read. And he’s, he’s going around talking about it and he is just saying it’s leverage. Leverage, leverage, leverage. It’s leverage that causes these huge blowups and we need leverage. We need margin. It helps grease the wheels of an economy. But when it gets out of hand, boy, that’s when we get into trouble.
Brian Dunhill:
[00:27:56 – 00:29:12]
Absolutely. And we saw it last October with the cryptocurrency markets. They have unlimited leverage in different vantage points. What happened all of a sudden when it started to slide, it just wasn’t stopping. But that’s, that’s the leverage in those, those aspects. And this is that next potential Aspect, I tend to think we have tons of bubbles. We’ve seen several of them burst. The general marketplace is not where the bubbles are. We have the cryptocurrency space, we have the yen carry trademark. We have some of these private equity and private debt aspects, definitely that most all of our clients are not sitting in. But they can cause a ripple effect. It’s not keeping me from investing. It shouldn’t keep any of our clients from investing. It will sell a lot of newspapers and it will harbor a lot of fear. We should have an awareness. But essentially we should know also long term, those are not the places that we belong in. That’s where the professional traders should be in. And the problem is some of their mantras are I won’t be there, you won’t be there, therefore it’s not their problem.
Richard Taylor:
[00:29:12 – 00:29:17]
So what are you, are you saying you think there’s, you think there’s going to be like a blow up in this whole yen curry trade, do you think?
Brian Dunhill:
[00:29:18 – 00:29:30]
I think that’s one of the big, the big places. It’s, it’s not, it’s not predicting when and where. I’m sorry, when. It’s saying where could there be a calamity? That could be one of those places.
Richard Taylor:
[00:29:31 – 00:29:37]
So retail investors, international retail investors, people you work with, what should they do? What does this mean for them and.
Brian Dunhill:
[00:29:37 – 00:30:15]
The portfolios that we run, essentially it means that we want to be careful to not be too exotic. In some of the alternative spaces, we’ve been very cookie cutter, especially in the past years when it came to a lot of these hedge funds, techniques especially, that play into those types of effects. They can unwind as fast as they grow. Yes, that private equity space, same, same type of thing. If, if you’re going into them, they should be a small part of your portfolio. But for most retail investors, they’re too sophisticated because they can unwind and destroy a portfolio very quickly.
Richard Taylor:
[00:30:15 – 00:31:36]
Right. 100%. So we’ve like, we’ve looked into this, we’ve flirted with it, we’ve even dabbed our toe in it with a certain, with a couple of clients who this is, they really wanted this. It’s been a huge ex, guys and I, and I’ve approached it so skeptically because it reminds me, I got into this profession or this industry, whatever you want to call it, in 2007, right, and I worked for Scottish widows. I was going around seeing financial advisory firms and, and, and trying to get them to, to, to use Scottish widow’s products. And in 2007 I’d get invited to all these breakfast meetings and be fund managers there and I’d go around and see clients and. And this was a time of just. The esoteric stuff was winning student loan stuff. There was arch crew was one big. I don’t even know what it was, but it was offshore and it involved cells. There was just stuff, lots and lots of stuff, diversification stuff, stuff that was apparently marked a model. It was never gonna go down. And it. And then I’ve been in the industry like within two or three years, it all, it all blew up horribly. Some of it never came back in the crisis. And that just left me so burned and skeptical of this stuff. And then when. Rise of private equity, private credit. So not everything. Not everything. There are pockets of good stuff, but so much of it reminded me of what I saw in 2007, 2008. And I want nothing to do with it.
Brian Dunhill:
[00:31:36 – 00:31:46]
There’s some great private equity funds. Most of them are not accessible for anybody unless you have the net worth like what Richard has, but not at my level.
Richard Taylor:
[00:31:47 – 00:31:49]
I wish. I think you’re the one with the boat. Right.
Brian Dunhill:
[00:31:51 – 00:31:52]
That’s why I’m broke.
Richard Taylor:
[00:31:53 – 00:31:55]
All right. Two shakes that point.
Brian Dunhill:
[00:31:58 – 00:32:49]
No, I think it’s one of those wonderful worlds that all of a sudden when you take out accessibility to what’s going on in the day to day market valuation, all of a sudden we’re left with less information. That’s the private equity field and sometimes that comes at great advantages. But a lot of times that just means we, we won’t see that, that coming. Like the two, the two funds that basically imploded on JP Morgan, they go from being priced at 100 cents on the dollar. The next day there’s zero cents on the dollar. That is the risk of being into those semblances because you’re not getting that true market effect. We like to be on the open market so that we can see exactly what’s going on. We can get the constant valuations and we can get the diversification through that.
Richard Taylor:
[00:32:49 – 00:33:54]
Do you know, you know what? I. I do get it. So I was about to say, you know what I don’t get, but. But I do get it. So it’s not that. But you know what? It frustrates me and I think this is as much our fault as a profession, if not more so. A communication is. Or maybe it’s just human nature. You know, that whole fear and greed thing is the stock market, I know that’s overly broad, but let’s just. The US stock market has delivered on what on average 10 a year in the last hundred years, 10 more in the last 15 years. Once you, once you look do the math and compound over 20, 30, 40 years is it that’s life changing returns. I mean you take a million dollars and compound it at 1, 1%, it’s something like, it’s like it’s a big, big number we don’t need to go searching for to juice it. And it’s certainly not commensurate to the risk that you take. I don’t believe you can get regular people, the people that we deal with. You can get everything you need and more from the public markets I believe.
Brian Dunhill:
[00:33:55 – 00:35:06]
Absolutely. Absolutely. And, and it is just like you said. How do you manage the greed portion of things? A lot of the times I like talking to people about these types of things but then explain to them why I’m not investing in them but why we follow them because they’re interesting. Some of them are, are the cutting edge changes to, to, to the world. It will be hard not to want to dabble in OpenAI if they become a public company or SpaceX because they’re very interesting companies. But it’s, it’s the same reason. For instance, I’m not a huge investor in China. I, I think that China is forever interesting. But when you break it down they’re more capitalistic than we are in the west. And that basically means that the pricing power goes down and therefore the profitability of the companies doesn’t go up. We lose that opportunity to make those decent profits, those 10% per annum over the long haul. And that’s what we really want to go after. We can examine the entire market but we want to basically simplify and measure things on a risk to return basis.
Richard Taylor:
[00:35:08 – 00:35:11]
Well, okay, so last item on the docket. Valuations.
Brian Dunhill:
[00:35:12 – 00:35:45]
Valuations is the age old piece. I’m going to steal a piece. I don’t know if you’ve seen this from First Trust. They publish a nice report that goes from 1998 to present. Whether you invested on all time highs, which today the NASDAQ hit another all time high as we’re recording or whether you would have invested it on any other day. The five year return if you invested on any other day would be 76% great returns for a five year return.
Richard Taylor:
[00:35:46 – 00:35:49]
So let me just understand. So I’ve invested, it’s not an all time high.
Brian Dunhill:
[00:35:50 – 00:36:03]
If they invested on any other day except for an all time high, they would have made 76%. Okay, but you went with only the days where we Hit an all time high, five years later, you’d be up 82%.
Richard Taylor:
[00:36:03 – 00:37:09]
Right. I love that you brought this up. I just want to, I want to take a moment here because we throw numbers around and people get lost. But this is such a foundationally important point because I’m, I’m hearing, we have lots of conversation with clients recently and they’re like getting nervous about where the markets are and what valuations are. And it’s human nature to think, oh, a new high, we’re at the top, it’s going to crash. No, like, that’s a sign of momentum. That’s a sign that things are going well. And generally new highs beget new highs. Eventually, obviously that will not be true. But, but the more often than not, because that’s how markets work. More often than not, they’re up, it will be. So just to reiterate what Brian has just said, the investing your money on, on the day when the market hits a new all time high. I. Investing at the top. At that moment, you’re investing at the top, which we’re always told, don’t do, don’t do, buy low, sell high, but you’re investing at the top. Five years later, on average, you have a better return 82% versus if you’d invested on any other day. That’s fundamentally important that people grasp that.
Brian Dunhill:
[00:37:10 – 00:37:17]
I love these types of aspects because there’s an expression that economists have predicted 11 out of the last 10 recessions.
Richard Taylor:
[00:37:17 – 00:37:17]
Yes.
Brian Dunhill:
[00:37:17 – 00:37:19]
And it’s so true.
Richard Taylor:
[00:37:19 – 00:37:25]
That’s a general. It’s normally 19 out the last five or something. And some are worse than others.
Brian Dunhill:
[00:37:26 – 00:37:33]
Oh, absolutely. I mean, there’s, there’s certain, certain people that show up in our feeds and you’re like, wait, you’ve been calling the same bear market for five years.
Richard Taylor:
[00:37:33 – 00:37:38]
You have to bear sound smart bulls make you money.
Brian Dunhill:
[00:37:38 – 00:37:47]
Yep, absolutely. I mean, I, I think of, I think if sometimes our job feels like gym class, as long as we show up, we get an A, right?
Richard Taylor:
[00:37:47 – 00:37:47]
Yeah.
Brian Dunhill:
[00:37:47 – 00:37:52]
Yeah. The markets are up 70 of the time. Hey, 70 is a passing grade.
Richard Taylor:
[00:37:52 – 00:37:52]
Yeah.
Brian Dunhill:
[00:37:52 – 00:40:42]
And that’s where we get those 10 rate of returns. It’s when you get out and you hold out for a long period of time that you can lose those big momentum factors inside of the portfolio. But we have to remember we’ve had extreme earnings growth over the last couple of years and we’ve talked about it several times on this podcast. But we have to remember the 42% of the S&P 500 that’s made up by those Batman stocks, those top 10 technology stocks, 60% of their earnings come from outside the United States. Two of their CEOs are Indian, two of them, their biggest markets, India. Right. Are these American companies or are they global companies? They’re global companies. Right. Every time the dollar goes down, The S&P 500 should be in turn going up because so much of their earnings are coming from abroad. The Overall S&P 500, 40% of the earnings come from abroad. The dollar goes down, the S&P 500 goes up. These are those big triggers then. That’s the first factor that we know. Essentially the Trump administration wants to push down the dollar. The second factor, they want to push down interest rates. Well, is this by slowing down the economy because employment’s higher, because they’ve let go of so many government employees, Is it because inflation is no longer the main factor, or is it just essentially because of slowing economic units in the United States? Could be all three, could be one of the three. Any regard interest rates go down, we can talk about huge growth in those types of companies. We stumbled upon a small cap company, $5 billion company. You know, we’ve been in the business so long back, back when we were looking it up, small cap was under a billion. Now it’s anything under 5 billion. So it tells you how big things have gotten. We were looking at this company, they were only making $50 million worth of revenue, but they had $200 million worth of debt payments per annum. If interest rates drop by 1% all of a sudden, they would double their profitability. Right, double their profitability by the action of the Fed. That’s just one example. When we go through all of the small cap universe, it really proves why historically small and mid cap companies outperform when we go into recessions or survive through recessions. Because historically interest rates go down and they’re the most affected by those interest rates. So again, stock market should outperform because the US Dollar goes down, should outperform because interest rates are looking at going down. But third of all, earnings are growing. And whether you love or hate Donald Trump, he’s deregulating aspects. And when you deregulate, that’s going to reduce costs, that increases earnings.
Richard Taylor:
[00:40:42 – 00:41:34]
And fiscal stimulus. There’s going to be a whole load of fiscal stimulus this year. People are going to get refund checks that they weren’t expecting. And there’s just, there’s just, there are tailwinds right now. I also think, Brian, I think people, regular people, even myself, sometimes we forget that stocks really in the long run, maybe not in, in the short run, but in the long run, a function of earnings, which it just means profits people, you make more profits, your stock price is more. And these. And there are companies making unbelievable amounts of money and growing, making, making more humble amounts of money and that. And so we hear, you know, everyone’s getting scared of multiples and growth, but these co. It’s not built on. In the late 90s, it was built on nothing. It was built on sand. Now it’s built on real money being made, real earnings and not just tech. You look at JP Morgan and stuff, they are printing money.
Brian Dunhill:
[00:41:35 – 00:42:27]
Well, and, and whether you believe in the AI revolution or not, some are calling it the third industrial revolution. The industrial revolution, then computing, now AI. I don’t know one company that hasn’t increased their productivity because of AI. All of us, you’ve probably. We’ve gone from three years ago saying I’ve done a chatgpt to now inside of our company we have individual LLMs. Right? We’re no longer arguing about whether we should use AI, we’re arguing about which AI to use and which one’s the best for each different situation. We’re looking at tractor companies and John Deere using AI to become more productive on farms. Every company is going to be more productive now in this new industrial revolution and that’s just going to increase profitability going forward.
Richard Taylor:
[00:42:28 – 00:42:58]
Brian, what’s the message? The message then, I think, and it sounds like you echo it is, yeah, valuations are slightly, you know, average valuations, multiples are slightly higher than their historical norm. But they, they justified and there are, there are real tailwinds now, you know, who knows what’s around the corner or existential threat that could burst out of nowhere. But absent that, things look pretty good. And you shouldn’t just be scared because the stock market is high. That’s actually quite a good sign.
Brian Dunhill:
[00:42:58 – 00:44:19]
Absolutely. Yeah, absolutely. Wall street is a little different than, than Main street, essentially. Sometimes the consumer is doing worse even though the stock market is doing better. This might be one of those time frames, but that doesn’t mean we’re negative about the stock market in any way, shape or form. Going into 2026, we’re very optimistic that we’re going to have a great year on the global stock markets. We’re going more international than we are us. That is a diversification play into many different aspects. Emerging markets are wonderful as, as First Trust put it yesterday, Korea is no longer just K pop, it’s also K stock and they’ve had the same. I enjoyed that one, though. I enjoyed that one for sure. But emerging markets are back in play. We’ve had, we’ve had times of problems there, but it’s figuring out how to build a good, well, diversified portfolio. And I do believe that is the only free lunch that we’ll have in this. We’re going to have winners and losers in the AI revolution. We know that. But if you have a diversified mix, we’re going to have a growth of the overall stock market for sure in the next year.
Richard Taylor:
[00:44:20 – 00:44:28]
Good. All right. Well, I agree with you. All right, well listen, let’s leave it there on that positive note then. So that’s, that’s our first macro aggressions under our belt.
Brian Dunhill:
[00:44:28 – 00:44:30]
Loved it. I can’t wait for the next.
Richard Taylor:
[00:44:33 – 00:45:17]
Good. Right. Well get right in your next email because that’s obviously going to form the the basis of our next one. Again, I hope everyone enjoyed that. Any feedback? Comments welcome. We will take it on board. As you know, we are just trying something new here and we want to keep it. We don’t want to stray too far from our mission, which is helping expats, us connected expats to thrive. So if anyone has any feedback, any ideas, any suggestions, any questions, throw, send them in and we will, we will, we will read them and act upon them. Brian thank you very much my friend. People need to subscribe. Let me, let me rephrase that, please. If anyone’s enjoying the show, please subscribe, even leave a comment or rating. That would be enormously helpful and I will see you again next month, my friend.
Brian Dunhill:
[00:45:17 – 00:45:20]
Thanks so much Richard. See you soon. Thanks everyone.
Richard Taylor:
[00:45:21 – 00:46:18]
All right folks, that’s another episode of Expat Wealth Under Our Belts. Thank you for listening. I appreciate it and I appreciate you. If you’re enjoying the show and would like to support the mission, which is to help ambitious expats thrive in America, I’d ask you to subscribe to the POD wherever you listen and also consider leaving a rating and review. This stuff really does matter. Please help us get this information to the people who need it, that is to your fellow expats. Just a quick reminder that this show is brought to you by Plan First Wealth. We are a US Based financial planner and wealth manager and we help successful American and international families living across the US to make the most of their opportunity and ultimately to retire happier. If you’d like to know more about how we might be able to help you, you can find us on our website, planfirstwealth.com or you can look me up on LinkedIn. Do get in touch. We’d love to hear from you. As always, thank you to the podcast guys for their help producing this episode and the entire show. See you next week.
Production