“Not all those who wander are lost.”

— Bilbo Baggins, The Lord of the Rings

 

This winter has delivered some of the most challenging weather conditions Eastern North America has seen in years. Persistent cold and heavy snowfall reminiscent of decades past have kept many of us busy shoveling driveways, scraping windshields, and monitoring forecasts more closely than usual. Winters like this naturally turn our attention elsewhere.

 

For many clients, that “elsewhere” means warmer climates — whether it is a short trip to a southern destination or farther abroad. And once we leave Canada, one concept quickly moves into focus: currency. What it costs, what it’s worth, and how far it goes.

 

This month, we want to use that real-world experience as a starting point to discuss how currency fits into portfolio construction and how thoughtful currency diversification can support long-term, risk-adjusted outcomes.

 

Currency as a Component of Global Diversification

 

Canada represents a relatively small share of global capital markets. As a result, globally diversified portfolios naturally include investments priced in foreign currencies. This exposure does not occur by chance — it reflects access to a broader range of companies, industries, and economic drivers than domestic markets alone can offer.

 

Foreign currency exposure can expand the opportunity set beyond Canadian markets, reduce reliance on a single economy, fiscal framework, or central bank, and support long-term purchasing power in a global economy.

 

Viewed this way, currency exposure forms an integral part of global diversification rather than a separate decision layered onto a portfolio.

 

The U.S. Dollar and Recent Market Questions

 

Over the past several months, the U.S. dollar has weakened relative to the Canadian dollar following a period of notable strength. This shift reflects a combination of factors, including changing interest rate expectations, evolving capital flows, and global policy dynamics. At the same time, central banks have modestly diversified reserve holdings, increasing allocations to assets such as gold — one contributor to gold’s recent appreciation.

 

These developments have renewed discussion about the long-term role of the U.S. dollar in the global financial system. While these debates surface regularly, it remains important to separate short-term currency adjustments from structural change.

 

The United States continues to operate as the world’s largest economy, and U.S. markets represent a substantial share of global equity market capitalization. U.S. capital markets offer unmatched depth, liquidity, and institutional strength, which continue to anchor global investing. Although central banks have diversified reserves at the margin, no clear alternative currently offers comparable scale, liquidity, and infrastructure.

 

The Reality of Currency Movements

 

Currency movements can influence Canadian-dollar returns over shorter periods — sometimes positively, sometimes negatively. When the Canadian dollar strengthens, foreign investments may translate into lower returns in Canadian-dollar terms, even when underlying business fundamentals remain strong. When the Canadian dollar weakens, foreign holdings may provide an additional return tailwind.

 

Reliably forecasting currency movements remains extremely difficult. For that reason, we do not view consistent currency timing as a dependable source of long-term value. Instead, we consider currency exposure within the broader framework of diversification and manage it with a long-term perspective.

 

Beyond the U.S. Dollar

 

Although U.S. dollar exposure remains central to global portfolios, it does not represent the only option. We can also invest in other major currencies, such as the euro or British pound, when circumstances warrant.

 

This flexibility can benefit clients who have received funds or inheritances in foreign currencies, plan future purchases or spending abroad, or maintain personal or family ties to specific regions. In these cases, we can incorporate currency considerations into portfolio design to help align assets with future needs while managing overall portfolio risk.

 

A Conversation Worth Having

 

As always, effective planning begins with conversation. Please let us know if you have any questions or would like to explore currency considerations further. We wish you a mild, enjoyable start to spring and brighter days ahead.

 

Team News

 

We are delighted to share some exciting news from within our team:

 

We are pleased to welcome Santiago Frias to our team. Santiago is a graduate of SUNY Albany in upstate New York where he earned his Bachelor of Science in Business Administration, and he also holds a postgraduate certificate from Syracuse University. During his studies, he played varsity soccer, having served as team captain at Syracuse and helping lead his team to the NCAA Tournament. Santiago brings energy, intellect, and enthusiasm to the team — we are thrilled to have him on board.

 

Warm regards,

 

Moore-Miller Investment Group