Market Minute 9-19-25- Behold the "Hedge America" Trade

After a day when four major US averages all set records together for the first time since 2021, equity markets are subdued. Gold and silver are flattish, too, while crude oil is down a bit. The dollar and interest rates are rising modestly.

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Turns out many foreign investors aren’t outright dumping US assets. They’re buying them – and simultaneously using derivatives to hedge against losses tied to the falling US dollar, according to Bloomberg. The “Hedge America” trade could ultimately top $1 trillion by one estimate. But ironically, increased global demand for dollar hedges could actually help fuel deeper dollar declines.

^DXY, MAGS (YTD % Change)chart

Data by YCharts

Sure, it’s a bubble...but the surge in “Big Tech” stocks has further to run – or so say Bank of America Corp. (BAC) strategists led by Michael Hartnett. After studying 10 other bubbles, they found average gains of 244%. The Mag 7 stocks have “only” risen 223% from their March 2023 low. They also “only” trade at 39 times trailing 12-month earnings, compared with a peak bubble average of 58. So far in 2025, the Roundhill Magnificent Seven ETF (MAGS) is up 18.1%.

The US government may get even more deeply involved in private business, according to the Wall Street Journal. The Trump Administration’s economic team reportedly may use some of the $550 billion from a US-Japan trade deal to fund domestic factories and infrastructure. Nothing is set in stone yet, but the money would likely be sprinkled throughout the semiconductor, pharmaceutical, energy, shipbuilding, and tech sectors.

See also:SPX: How Stocks and the Economy Interact

Meanwhile, investors will be watching to see how today’s call between President Trump and Chinese President Xi Jinping goes. The two leaders are expected to discuss the potential sale of TikTok’s US operations to a consortium of US investors, semiconductor trade policy, and tariffs the two nations have slapped on each other’s imports. A 90-day pause on the worst levies is set to expire in November.

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