The 2025 Dollar Collapse: Heading for the Biggest Decline Since 1986

Halfway through 2025, the U.S. dollar is looking downright sickly...

The once-mighty greenback has slumped so much this year that it will likely post its worst first-half performance since 1986. For context, that was right after the Plaza Accord – when the dollar was deliberately pushed off a cliff by global policymakers.

Fast forward to today, and the dollar's slide is raising the specter of something we haven't seen in decades: significant capital flight from the United States.

And that could spell trouble for your financial security.

Let's start with the numbers...

The U.S. Dollar Index ("DXY") – a measure of the dollar against a basket of major currencies – has been getting weaker for the past two years. But the decline accelerated in early 2025.

As of yesterday's close, the dollar index is down by nearly 10%... one of the sharpest falls in modern history. Currency traders are dusting off their charts and noting that you'd have to go back to the mid-1980s to find a comparable first-half route for the dollar.

Back then, after the Plaza Accord of September 1985, the dollar plunged as countries coordinated to drive it lower. There's no official second "Mar-a-Lago Accord" from President Donald Trump today... at least not yet... but there might as well be, given the dollar's trajectory.

• In January, the dollar stumbled as markets anticipated the new Trump administration's easy-money, weak-dollar bias.
• February and March came with a barrage of tariffs and "resetting" trade imbalance headlines, when the dollar took another step down as investors began pricing in a more isolationist U.S. stance.
• By April, whispers of a potential "Mar-a-Lago Accord" (an international deal to weaken the dollar) grew louder, even as officials denied it. That psychological overhang helped push the dollar down further.
• By June, the evidence of deliberate dollar weakness was hard to ignore: U.S. policymakers from the president on down seemed comfortable with, even supportive of, a softer dollar.

Now, investors across the world continue to sell dollars, making it a largely one-way bet.

Many currencies, like the euro and yen, are at multiyear highs compared with the dollar. The price of gold, the eternal yardstick of "real assets," is making all-time highs. And some analysts predict $5,000 gold is coming soon.

The key difference between the late 1980s is that the drop then was intentional and coordinated...

Today, it's a confluence of factors that are all pointing in the same direction: down.

Thirty-year market veteran Dan Ferris points out that the dollar's weakness is not an accident. In his new The Most Dangerous Man in America documentary, he notes the dollar has been quietly weakening for over two years as a precursor to an expected reset.

Indeed, the dollar peaked in late 2022... then started to decline as the Federal Reserve eased off rate hikes and Washington started dropping hints that a strong dollar was no longer sacrosanct.

And today, the administration's pivot to "Main Street over Wall Street" implicitly welcomes a weaker dollar because it helps U.S. factories... even if it hurts financial assets.

A plunging dollar is essentially the world's vote of diminished confidence in U.S. assets.

For the average investor or retiree, a weak dollar is a mixed bag...

Good news first: If you own non-U.S. investments, you're likely seeing a boost. International stock funds are generally up in dollar terms even if those markets are flat in local terms, simply because the foreign currency has gained on the dollar. If you hold gold or oil or real estate, those tend to appreciate when the dollar slides, reflecting inflation expectations.

So any "real asset" allocation you had should be doing its job as a hedge.

The bad news: The money under your mattress or in your bank account is silently shrinking in value. You'll notice it with rising prices... Appliances, electronics, and cars that rely on imported components are getting costlier for Americans.

We haven't yet seen 1970s-style inflation, but if the dollar keeps setting multidecade records on the downside, we could see a surge in inflation with real returns on savings turning negative.

Stansberry Research analyst Dan Ferris has some simple solutions to help protect your portfolio, including:

• Diversify away from pure dollar-denominated and U.S.-based assets by adding international stocks to your portfolio.
• Consider increasing your allocation to assets like precious metals, commodities, and real estate.
• And expect overvalued sectors to suffer... the Magnificent Seven tech stocks – Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA) – are especially vulnerable.

Ferris doesn't endorse making radical, speculative moves... but does recommend preparing for more weakness in the dollar. After all, your retirement shouldn't hinge on the value of a piece of green-inked paper. You can watch the Most Dangerous Man documentary here.