Josephine Tom: «You Can’t Avoid the US Dollar»
There is much doom and gloom about the state of the greenback and the prospects of de-dollarization. Nonetheless, the global reserve currency cannot be dodged at least for the time being, Indosuez Wealth Management’s Josephine Tom told finews.asia.
Recently, there has been a revival of discussions about the possibility of de-dollarization. There are worries about the perceived safety and stability of the greenback, driven by the ongoing trade war and weaponization via sanctions. US President Donald Trump previously threatened to impose a 100 percent tariff on the nine-nation BRIC bloc if they were to form a rival currency.
While such fears may be warranted in the more distant future, it is not the case for the shorter term, according to Josephine Tom, a senior director and fixed income advisor at Indosuez Wealth Management.
«Time and time again, people talk about the demise of the US dollar. In the long run, you might try to find another substitute but not at this moment,» Tom said in an interview with finews.asia. «The US dollar still accounts for the majority of international debt issuance, 50 percent of SWIFT transactions and around 90 percent of FX trading. You can’t avoid the US dollar, to be honest.»
Debt Levels a Concern?
One area where investors may be concerned is debt levels in the US which may lead to excessive easing policies for repayment. However, Tom notes that at around 124 percent, the current US debt-to-GDP ratio is in fact lower compared to the ratio during the 2020 Covid pandemic.
«As long as the US continues its growth, there should be no big concerns. There is a saying that says you should not worry about how much you spend but rather how much you can make,» Tom stated.
«We believe the rise of the 30-year Treasury’s yield was driven mostly by fear and a shift in investments to lower duration. If you look at the 10-year Treasury, it is rather stable post the high in January.»
Fixed Income Preferences
Currently, Indosuez is advising clients to invest in shorter duration while being underweight on US credit with expectations of two rate cuts from the Federal Reserve this year.
It favors European fixed income, especially government bonds, due to solid fundamentals, tailwinds from fiscal policy, particularly with Germany’s stimulus and defense spending, as well as the European Central Bank’s dovish interest rate policy. In China, the bank sees solid opportunities outside of the property sector with Chinese corporates and banks expected to benefit from recent stimulus.
On private credit, Tom notes that the emerging asset class «may not be the cup of tea for many investors» given the low liquidity, despite satisfactory past performance.
Macro Uncertainty
Overall, however, the French private bank remains cautious on the global markets given the macro uncertainty caused by US policy.
«President Donald Trump’s America First policies are triggering a lot of volatility which will result in divergent growth in different regions,» Tom added. «We therefore have revised down the major GDP projections in 2025: 1.5 percent in the US, 0.5 percent in the Euro area and 4.5 percent in China. Our global growth projection has been revised down to 2.7 percent.»
