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STRONG DOLLAR & CHINA IMBALANCES | CROUCH CONNECTION| JAN, 2025 By Dave Crouch








STRONG DOLLAR & CHINA IMBALANCES


Happy New Year! As we step into 2025, we want to take a moment to thank you for your trust and partnership. A new year brings new opportunities and challenges, and we continue to be dedicated to our commitment to helping you achieve your financial goals.


In today’s interconnected global economy, shifts in one region can quickly ripple across borders, impacting investments, savings, and overall financial security. As I pointed out in our October 2021 letter, we’ve been closely monitoring developments in China’s economy, which is experiencing imbalances that may lead to significant currency instability.


These imbalances will eventually have to be resolved and that continues to be something that concerns me.  The strengthening dollar is the catalyst that has triggered several currency crises in the past with countries that trade with the U.S. and I suspect that the strong dollar combined with additional tariffs that President-elect Trump is proposing could cause problems in China that can only be resolved with a currency adjustment.


China’s economy has been a cornerstone of global growth for decades, but signs of strain are becoming more pronounced. Issues such as over-leveraged property markets, high levels of debt, and slowing consumer demand are creating vulnerabilities. Combined with persistent trade tensions and challenges in achieving sustainable growth, these factors heighten the risk of a currency crisis that could affect international markets.


What Does This Mean for You?


  1. Market Volatility: A potential devaluation of the Chinese yuan or broader financial instability could trigger heightened volatility in global equities, fixed-income markets, and commodities. Diversification and active portfolio management will be critical.

  2. Currency Exposure: If you hold investments directly or indirectly tied to China or other emerging markets, the potential for currency fluctuations may impact returns. This risk underscores the importance of balanced exposure to global markets.

  3. Opportunities and Risks: While challenges loom, periods of economic disruption can also create opportunities for well-prepared investors. Identifying resilient sectors and companies is key to navigating uncertain times.

 

Our Strategic Approach


At Aspen Grove Asset Management we’re proactively analyzing the evolving situation and its potential implications for your portfolio. Our priorities include:


  • Enhanced Risk Management: Reviewing exposure to vulnerable markets and adjusting allocations to mitigate risks.

  • Identifying Safe Havens: Exploring investments that traditionally perform well in volatile environments, such as investments in the utility and consumer defensive sectors.

  • Seizing Growth Opportunities: Pinpointing sectors and regions less impacted by China’s challenges, including those benefiting from supply chain diversification and domestic-driven growth.


What Should You Do?


  1. Stay Informed: We’ll continue to keep you updated with timely insights and recommendations as events unfold.

  2. Review Your Portfolio: Schedule a review with us to ensure your investment strategy aligns with current risks and opportunities.

  3. Maintain a Long-Term Perspective: While short-term disruptions can be unsettling, history shows that disciplined, long-term strategies prevail over time.


If you have any questions or concerns, please don’t hesitate to reach out. Together, we can navigate these uncertain times with confidence and purpose.


Thank you for trusting us with your financial future.


Warm regards,



CEO & Chief Investment Officer


Aspen Grove Asset Management

 

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.” “AGP Franklin, LLC (“AGP Franklin”) is a registered investment advisor.  Aspen Grove Asset Management (AGAM) operates as a DBA (Doing Business As) under AGP Franklin, LLC, a Registered Investment Advisor (RIA) providing investment advisory and related services for clients nationally.”

 

 

Buffett Quote:


“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”


Warren Buffett


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