| --- |
| title: "House Oversight: Estate Documents (Nov 12) (HOUSE_OVERSIGHT_014594)" |
| source: "House Oversight: Estate Documents (Nov 12)" |
| sourceUrl: "https://www.justice.gov/epstein" |
| date: "2026-01-01" |
| category: "House Oversight" |
| eftaNumber: "HOUSE_OVERSIGHT_014594" |
| ocrPages: 1 |
| ocrChars: 3952 |
| ocrElapsed: 0.0 |
| parseTier: "external-legacy" |
| engine: "engine undisclosed (ep-nov-12.greg.technology mirror)" |
| externalSource: "greg-ep-nov-12" |
| externalLicense: "not granted" |
| externalCredit: "ep-nov-12.greg.technology" |
| externalUrl: "https://ep-nov-12.greg.technology" |
| --- |
| |
| incorporates this view, as we are neutral on the |
| euro, yen and pound versus the US dollar, but |
| remain bearish on the Chinese renminbi. |
| We discuss our view on the broader US dollar, |
| as well as each of these currencies, next. |
| US Dollar |
| Following three consecutive years of dollar |
| outperformance, it would be reasonable to assume |
| the up-cycle is nearing an end. After all, dollar |
| valuation is now close to its historic average level |
| relative to the currencies of US trade partners, after |
| adjusting for inflation. Moreover, the length of this |
| dollar bull market is approaching that of the two |
| prior episodes shown in Exhibit 71 and shares a |
| similar underlying driver-tighter monetary policy |
| in the US relative to its global peer group. |
| But while we expect the pace of US dollar |
| appreciation to slow, there are many reasons |
| to believe the greenback's outperformance can |
| continue this year. Dollar valuation remains |
| below the peaks reached in the 1985 and 2002 |
| bull cycles, suggesting it is not yet prohibitively |
| expensive. The dollar should also benefit from |
| solid US macroeconomic fundamentals relative to |
| other developed economies. President-elect Trump |
| ran on a platform that includes fiscal expansion |
| and corporate tax reform. Although his economic |
| team's spending plan is still forthcoming, the |
| package could represent an economic tailwind that |
| may justify tighter US monetary conditions at a |
| time when foreign central banks have committed |
| to easier policy. In turn, relatively higher US yields |
| may entice global investors to favor US dollar |
| assets over lower-yielding foreign-denominated |
| alternatives. |
| Furthermore, some elements of the new |
| administration's desired corporate tax reform |
| could present material upside risk to the US dollar. |
| For example, the destination-based tax system |
| supported by several House Republicans disallows |
| deductions for any imported good or service— |
| Exhibit 71: US Dollar Real Effective Exchange Rate |
| Dollar valuations are near their long-term average but below |
| levels reached in past bull cycles. |
| Z-Score |
| 2 - |
| 0 |
| -2 |
| 1973 |
| 1978 |
| 6.3 Years |
| 1983 |
| 1988 |
| 1993 |
| 6.8 Years |
| 1998 |
| 2003 |
| 2008 |
| 5.4 Years |
| 2013 |
| Data through November 30, 2016. |
| Note: Z-score is calculated on data since 1973 and represents the number of standard deviations |
| from the mean. Shaded areas highlight periods of dollar strength. |
| Source: Investment Strategy Group, Datastream. |
| Dollar gains are likely to be more |
| modest and reflected in a narrower |
| set of currencies as the dollar bull |
| market enters its fifth year. |
| effectively supporting US goods by making them |
| more competitive. Economic theory suggests that |
| free-floating currencies such as the US dollar |
| would need to adjust higher by the amount of |
| the tax to create equilibrium with similar goods |
| sourced across foreign borders. Taken at face |
| value, this implies a 20% destination tax would |
| require a simultaneous-and potentially very |
| disruptive—20% increase in the US dollar. A tax |
| holiday for cash held abroad could be similarly |
| dollar positive, in spirit if not in magnitude. While |
| it is true that a majority of the $2.6 trillion of US |
| corporate earnings trapped overseas are already |
| held in US dollar assets, the greenback would still |
| enjoy a tailwind if corporates elected to repatriate |
| some portion of the foreign currency balance. |
| That said, the risks to the US dollar are not |
| exclusively to the upside, as much of the good |
| news is embedded in current prices (see Exhibit |
| 72). Consider that the bulk of last year's dollar |
| advance occurred in the two weeks following the |
| US presidential election in November, as |
| the market quickly discounted a portion |
| of potential policy changes. Moreover, |
| Federal Reserve rate hike expectations |
| for 2017 have increased following |
| stronger US activity data during the |
| second half of 2016. Lastly, we expect |
| the BOJ and ECB to maintain their |
| highly accommodative policies again |
| this year. With these tailwinds already |
| Outlook Investment Strategy Group |
| 61 |
| HOUSE_OVERSIGHT_014594 |
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