1 00:00:12,211 --> 00:00:14,112 [Elena Reyes] Welcome to Outside the Dollar. 2 00:00:14,461 --> 00:00:15,711 [Elena Reyes] I'm Elena Reyes. 3 00:00:16,425 --> 00:00:20,375 [Elena Reyes] This week confidence itself is being tested-in currencies, 4 00:00:20,775 --> 00:00:21,375 [Elena Reyes] in markets, 5 00:00:21,875 --> 00:00:25,376 [Elena Reyes] in the economy from a handful of different directions at once. 6 00:00:25,975 --> 00:00:26,376 [Elena Reyes] First, 7 00:00:26,676 --> 00:00:30,826 [Elena Reyes] we're looking at China's quiet effort to reduce its dependence on the dollar, 8 00:00:31,276 --> 00:00:34,326 [Elena Reyes] expanding settlement in its own currency step by step. 9 00:00:34,876 --> 00:00:42,876 [Elena Reyes] Then I want to stress test a question that sounds obvious but isn't: Does a healthy economy actually mean a healthy stock market? 10 00:00:42,676 --> 00:00:43,376 [Elena Reyes] market right now? 11 00:00:43,676 --> 00:00:44,626 [Elena Reyes] After that, 12 00:00:44,776 --> 00:00:45,276 [Elena Reyes] inflation. 13 00:00:45,776 --> 00:00:50,125 [Elena Reyes] Why one of Europe's top central bankers is warning it isn't finished with us yet. 14 00:00:50,725 --> 00:00:54,426 [Elena Reyes] We'll also get into why UBS is staying bullish on gold, 15 00:00:54,775 --> 00:00:56,525 [Elena Reyes] even after its recent pullback. 16 00:00:57,025 --> 00:01:02,926 [Elena Reyes] And I'll close by asking what all of this means for how you think about diversification in your own portfolio. 17 00:01:03,825 --> 00:01:04,475 [Elena Reyes] Five threads, 18 00:01:04,825 --> 00:01:06,176 [Elena Reyes] one underlying question: 19 00:01:06,676 --> 00:01:10,126 [Elena Reyes] How much can we trust the system most of our money still runs on? 20 00:01:09,876 --> 00:01:10,225 [Elena Reyes] runs on. 21 00:01:10,475 --> 00:01:13,926 [Elena Reyes] Let's start with China and the slow rewrite of the dollar's role. 22 00:01:19,572 --> 00:01:24,772 [Elena Reyes] Every June bankers and policy makers fly to Shanghai for the Lujiazui Forum, 23 00:01:25,371 --> 00:01:26,722 [Elena Reyes] China's version of Davos, 24 00:01:26,972 --> 00:01:27,722 [Elena Reyes] and this year, 25 00:01:27,822 --> 00:01:31,022 [Elena Reyes] according to a CNBC op ed published June twenty eighth, 26 00:01:31,371 --> 00:01:36,322 [Elena Reyes] the signal coming out of that room wasn't about replacing the dollar; it was something quieter. 27 00:01:37,022 --> 00:01:42,921 [Elena Reyes] Reserve currency status just means most countries settle trade and park savings in one currency, 28 00:01:43,171 --> 00:01:43,722 [Elena Reyes] by habit, 29 00:01:44,072 --> 00:01:44,522 [Elena Reyes] the dollar. 30 00:01:44,921 --> 00:01:48,421 [Elena Reyes] That habit took decades to build; it doesn't flip overnight. 31 00:01:48,275 --> 00:01:51,025 [Elena Reyes] So what is China actually doing? 32 00:01:51,625 --> 00:01:59,275 [Elena Reyes] The CNBC piece argues China isn't trying to dethrone the dollar outright; it's expanding renminbi settlement in trade deals, 33 00:01:59,626 --> 00:02:01,626 [Elena Reyes] currency swap lines with trading partners, 34 00:02:02,126 --> 00:02:04,525 [Elena Reyes] energy contracts priced outside dollars, 35 00:02:04,975 --> 00:02:06,075 [Elena Reyes] piece by piece. 36 00:02:06,426 --> 00:02:09,725 [Elena Reyes] Why should someone with a 401k in Ohio care? 37 00:02:10,175 --> 00:02:15,425 [Elena Reyes] Because reserve status is what lets the U.S. borrow cheap and run deficits without immediate 38 00:02:15,425 --> 00:02:15,876 [Speaker 2] consequence. 39 00:02:15,252 --> 00:02:21,602 [Elena Reyes] Erode that demand slowly and you erode the machinery underneath everything else. 40 00:02:22,201 --> 00:02:26,951 [Elena Reyes] This isn't a headline crash we're talking about; it's a slow reduction of dependence, 41 00:02:27,502 --> 00:02:30,302 [Elena Reyes] one swap line and one settlement deal at a time, 42 00:02:30,701 --> 00:02:33,352 [Elena Reyes] and CNBC frames it exactly that way: 43 00:02:33,752 --> 00:02:34,902 [Elena Reyes] reduced dependence, 44 00:02:35,102 --> 00:02:36,502 [Elena Reyes] not sudden dethroning. 45 00:02:37,002 --> 00:02:41,051 [Elena Reyes] If confidence in the dollar's dominance is being tested at the currency level, 46 00:02:41,044 --> 00:02:46,194 [Elena Reyes] What happens when you look at the confidence baked into stock valuations sitting on top of it? 47 00:02:46,544 --> 00:02:51,144 [Elena Reyes] Are markets actually pricing the real economy underneath them or something else? 48 00:02:56,563 --> 00:02:58,114 [Elena Reyes] With that question hanging, 49 00:02:58,413 --> 00:03:07,163 [Elena Reyes] let's stress test an assumption a lot of investors carry without checking it—the assumption that a strong economy guarantees a strong stock market. 50 00:03:07,813 --> 00:03:11,713 [Elena Reyes] Yahoo Finance ran an analysis on June 29th, written with Reuters, 51 00:03:12,213 --> 00:03:17,313 [Elena Reyes] arguing the U.S. economy and the U.S. stock market are starting to move on separate tracks. 52 00:03:17,864 --> 00:03:19,014 [Elena Reyes] Think about what that means: 53 00:03:19,514 --> 00:03:20,663 [Elena Reyes] GDP can grow, 54 00:03:20,963 --> 00:03:22,364 [Elena Reyes] jobs numbers can hold steady. 55 00:03:22,388 --> 00:03:24,538 [Elena Reyes] And stock prices can still stall. 56 00:03:25,038 --> 00:03:25,288 [Elena Reyes] Why? 57 00:03:25,688 --> 00:03:27,538 [Elena Reyes] The piece pointed to three pressures: 58 00:03:28,038 --> 00:03:29,938 [Elena Reyes] valuations that already stretched, 59 00:03:30,388 --> 00:03:37,688 [Elena Reyes] real interest rates sitting at elevated levels and a wave of AI-driven spending propping up a narrow slice of the market. 60 00:03:38,288 --> 00:03:40,788 [Elena Reyes] Lear Capital's research raises the same flag: 61 00:03:41,188 --> 00:03:46,788 [Elena Reyes] a chunk of many retirement portfolios now rides on a small handful of AI-linked names. 62 00:03:47,237 --> 00:03:50,088 [Elena Reyes] If most of your equity exposure sits in that handful, 63 00:03:50,099 --> 00:03:54,650 [Elena Reyes] A healthy economy headline won't shield you from a repricing in that group. 64 00:03:55,199 --> 00:04:01,049 [Elena Reyes] A resilient labor market doesn't change the fact that valuations were priced for close to perfect outcomes. 65 00:04:01,599 --> 00:04:03,599 [Elena Reyes] When conditions shift even slightly, 66 00:04:04,099 --> 00:04:07,099 [Elena Reyes] elevated real rates make any repricing sharper. 67 00:04:07,750 --> 00:04:12,599 [Elena Reyes] Uncertainty like that tends to push investors to reassess risk they'd stopped thinking about. 68 00:04:13,050 --> 00:04:16,050 [Elena Reyes] The Bundesbank's Joachim Nagel is already flagging. 69 00:04:15,860 --> 00:04:19,759 [Elena Reyes] Gaining Pressure on Prices (Speaking from a Central Bank Forum in Sintra, 70 00:04:19,810 --> 00:04:20,210 [Elena Reyes] Portugal) 71 00:04:20,810 --> 00:04:21,410 [Elena Reyes] - INFLATION 72 00:04:26,899 --> 00:04:31,649 [Elena Reyes] With that inflation warning in mind, here's what Nagel actually told CNBC. 73 00:04:32,349 --> 00:04:37,099 [Elena Reyes] Speaking to reporter Annette Weisbach at the ECB's forum in Sintra, Portugal, 74 00:04:37,649 --> 00:04:41,750 [Elena Reyes] Bundesbank President Joachim Nagel said inflation is at risk of staying, 75 00:04:41,899 --> 00:04:42,649 [Elena Reyes] in his words, 76 00:04:43,049 --> 00:04:44,949 [Elena Reyes] significantly above target, 77 00:04:45,299 --> 00:04:48,449 [Elena Reyes] even with the U.S. and Iran ending their conflict. 78 00:04:54,117 --> 00:05:02,717 [Elena Reyes] UBS just raised its 12-month gold target to $5,200 an ounce, according to Investing Live, 79 00:05:02,867 --> 00:05:08,767 [Elena Reyes] reporting on June 26th. That implies roughly 30% upside from current levels. 80 00:05:09,467 --> 00:05:12,367 [Elena Reyes] Now, UBS isn't calling this a sure thing. 81 00:05:12,717 --> 00:05:15,567 [Elena Reyes] They're calling the recent dip a buying opportunity, 82 00:05:15,967 --> 00:05:17,567 [Elena Reyes] which is a specific claim, 83 00:05:17,867 --> 00:05:18,617 [Elena Reyes] not a guarantee. 84 00:05:19,067 --> 00:05:21,317 [Elena Reyes] Their case rests on three legs. 85 00:05:21,588 --> 00:05:22,188 [Elena Reyes] (one) 86 00:05:22,487 --> 00:05:23,987 [Elena Reyes] The Fed holds this year, 87 00:05:24,138 --> 00:05:26,688 [Elena Reyes] then cuts in twenty twenty seven; (two) 88 00:05:26,938 --> 00:05:31,588 [Elena Reyes] The dollar stays structurally stretched and weakens over time; (three) 89 00:05:31,938 --> 00:05:35,588 [Elena Reyes] Central bank buying keeps providing a floor under the price. 90 00:05:36,288 --> 00:05:39,487 [Elena Reyes] What happens if any one of those legs doesn't hold, 91 00:05:39,888 --> 00:05:43,188 [Elena Reyes] if the Fed doesn't cut or cuts less than expected? 92 00:05:43,788 --> 00:05:50,288 [Elena Reyes] UBS actually flags that risk themselves—they point to rising real yields and a stronger dollar. 93 00:05:50,163 --> 00:05:56,363 [Elena Reyes] as headwinds that could pin gold in a near term range of thirty eight fifty to four thousand. 94 00:05:57,113 --> 00:05:58,813 [Elena Reyes] Forecasts are just that: 95 00:05:59,264 --> 00:06:03,863 [Elena Reyes] twelve months is a long time and a lot of banks have missed targets before. 96 00:06:04,563 --> 00:06:12,213 [Elena Reyes] Not that gold is destined to hit fifty two hundred; it's that a major bank sees enough structural pressure—rates, 97 00:06:12,514 --> 00:06:12,863 [Elena Reyes] dollar, 98 00:06:13,163 --> 00:06:17,014 [Elena Reyes] central banks all pointing the same direction to make a public 99 00:06:16,884 --> 00:06:21,834 [Elena Reyes] public call on it; and it raises the bigger question I keep circling back to: 100 00:06:22,334 --> 00:06:28,934 [Elena Reyes] how much of your portfolio is actually diversified versus just concentrated in a few winning bets, 101 00:06:29,434 --> 00:06:30,934 [Elena Reyes] that's worth a closer look. 102 00:06:36,531 --> 00:06:43,181 [Elena Reyes] Shifting from metals to something closer to home-your 401k-according to Yahoo Finance, 103 00:06:43,581 --> 00:06:50,331 [Elena Reyes] a small number of AI-linked companies have driven an outsized share of stock market gains the last couple years. 104 00:06:50,882 --> 00:06:53,581 [Elena Reyes] If your retirement account tracks a broad index, 105 00:06:53,981 --> 00:06:55,431 [Elena Reyes] you might assume you're spread out. 106 00:06:55,882 --> 00:06:56,931 [Elena Reyes] You might not be. 107 00:06:57,581 --> 00:06:59,382 [Elena Reyes] Here's what that looks like in practice: 108 00:06:59,981 --> 00:07:03,031 [Elena Reyes] Say you hold an S&P 500 index fund. 109 00:07:02,867 --> 00:07:11,968 [Elena Reyes] fund; on paper 500 companies; but market cap weighting means a handful of the biggest names can drive a huge chunk of that fund's movement. 110 00:07:12,517 --> 00:07:14,617 [Elena Reyes] If most of those names are chipmakers, 111 00:07:14,867 --> 00:07:15,668 [Elena Reyes] cloud providers, 112 00:07:16,117 --> 00:07:19,817 [Elena Reyes] one or two software giants riding the same AI story, 113 00:07:20,218 --> 00:07:22,918 [Elena Reyes] you're carrying concentration you never chose. 114 00:07:23,317 --> 00:07:24,418 [Elena Reyes] Does that make sense? 115 00:07:24,867 --> 00:07:26,117 [Elena Reyes] You bought the market. 116 00:07:26,468 --> 00:07:30,367 [Elena Reyes] What you may actually own is a bet on a small group of companies that 117 00:07:30,367 --> 00:07:30,767 [Speaker 2] you don't know. 118 00:07:30,100 --> 00:07:32,500 [Elena Reyes] Anyone executing one expensive thesis: 119 00:07:33,300 --> 00:07:42,250 [Elena Reyes] the question is whether valuations ran ahead of earnings and what happens to accounts that look diversified from the outside if that narrow group stumbles. 120 00:07:42,850 --> 00:07:49,250 [Elena Reyes] Most people have never run that math; it doesn't show up on a quarterly statement; you have to go look for it. 121 00:07:49,800 --> 00:07:57,150 [Elena Reyes] Nobody knows whether this ends smoothly or the way concentrated trades have ended before; nobody rings a bell on the way down. 122 00:07:57,524 --> 00:07:59,774 [Elena Reyes] What you can control is exposure. 123 00:08:00,324 --> 00:08:06,774 [Elena Reyes] That's where physical gold and silver have historically been a possible fit-not competing with growth assets, 124 00:08:07,173 --> 00:08:10,074 [Elena Reyes] sitting outside the corporate earning cycle entirely. 125 00:08:10,673 --> 00:08:16,473 [Elena Reyes] Gold doesn't issue quarterly guidance; its record for holding purchasing power runs back centuries, 126 00:08:17,024 --> 00:08:23,074 [Elena Reyes] long before this tech cycle started-and before you move real money on anything from this episode, 127 00:08:23,473 --> 00:08:25,223 [Elena Reyes] China's currency strategy of 128 00:08:25,043 --> 00:08:32,144 [Elena Reyes] A five thousand two hundred dollar gold target-any of it-talk to a financial professional who knows your full picture. 129 00:08:32,693 --> 00:08:38,644 [Elena Reyes] Nothing here is investment advice-it's a map! You still need someone who knows your terrain. 130 00:08:39,494 --> 00:08:40,244 [Elena Reyes] Markets shift, 131 00:08:40,644 --> 00:08:41,494 [Elena Reyes] currencies shift, 132 00:08:41,843 --> 00:08:49,994 [Elena Reyes] even gold forecasts shift-the one number worth knowing cold is how much of your future rides on the same handful of bets. 133 00:08:55,593 --> 00:09:08,644 [Elena Reyes] So that's the week-China quietly building settlement options outside the dollar; stocks leaning on a handful of AI names; Nagel's inflation warning out of Frankfurt; and UBS still bullish on gold. 134 00:09:09,193 --> 00:09:09,943 [Elena Reyes] The common thread: 135 00:09:10,394 --> 00:09:11,943 [Elena Reyes] confidence in one system, 136 00:09:12,193 --> 00:09:12,843 [Elena Reyes] one trade, 137 00:09:13,043 --> 00:09:16,693 [Elena Reyes] one currency is worth educating yourself on right now. 138 00:09:17,293 --> 00:09:19,894 [Elena Reyes] Want Lear Capital's research on gold and silver? 139 00:09:20,394 --> 00:09:21,943 [Elena Reyes] Visit learcapital dot com. 140 00:09:21,683 --> 00:09:26,933 [Elena Reyes] dot com or text DOLLAR to four three three four three for a free investor kit. 141 00:09:27,533 --> 00:09:30,134 [Elena Reyes] Thanks for spending this time with Outside the Dollar. 142 00:09:30,634 --> 00:09:31,183 [Elena Reyes] Subscribe, 143 00:09:31,384 --> 00:09:33,483 [Elena Reyes] leave a review if this helped you think differently, 144 00:09:33,884 --> 00:09:37,183 [Elena Reyes] and I'll see you next week for the next set of stories moving markets, 145 00:09:37,483 --> 00:09:37,783 [Elena Reyes] metals, 146 00:09:38,083 --> 00:09:38,533 [Elena Reyes] and the dollar.