Trump’s dollar déjà vu: what an uncanny chart about the greenback shows about American exceptionalism

In January 2025, a compelling chart emerged from the desk of Adam Turnquist, the chief technical strategist at LPL Financial. He had been examining the U.S. Dollar Index’s trajectory during Donald Trump’s two presidential terms, attempting to uncover whether the second term was echoing the first. As he shared updates periodically with his colleagues, he found himself making the same tongue-in-cheek remark: “Why do we even try to predict?” The reason for this jest becomes clear when one views the similarities between the two terms in terms of the dollar's performance.

A Pattern in Motion

Turnquist’s chart reveals a haunting resemblance in the dollar's trajectory over time. Following Trump’s 2016 election victory, the Dollar Index rallied approximately 8% until January 2017, only to fall sharply by about 15% over the subsequent 293 trading days, hitting its nadir in early 2018. The dollar then rebounded, climbing 17% until the pandemic disrupted this upward trend in 2020.

Fast forward to 2024, and the dollar has once again followed a remarkably similar path. After peaking in January 2025, the index experienced a 13% decline over 269 trading days, leading to speculation that the dollar might be poised for yet another sustained rally.

Turnquist notes the striking parallels, observing that “the dollar has tracked so closely, not only in magnitude but in duration.” Both terms initiated with an optimistic rally, faced a significant reversal as economic realities set in, and then rebounded—though the conditions affecting these movements varied dramatically.

Different Landscapes, Similar Scripts

While Turnquist acknowledges the uncanny symmetry in these patterns, he is quick to point out the differing macroeconomic landscapes. The initial Trump term was characterized by an accommodative Federal Reserve and inflation rates below target levels. In stark contrast, the current economic environment includes an inflation rate that continues to challenge the Fed’s 2% target, coupled with elevated oil prices.

This leads to the critical question: if the macro conditions are so different, what is driving this consistent script? Turnquist contemplates the potential impact of Trump’s policies, which he initially dismisses, noting the former president has not been vocal about the dollar's strength lately. Instead, he proposes a more structural explanation rooted in economic fundamentals.

Growth Expectations and Policy Sentiment

From Turnquist’s perspective, the dollar’s performance has become a barometer of relative economic strength. The initial enthusiasm following Trump’s policies led to a reflation trade that initially boosted the dollar. However, as reality set in, the anticipated growth did not materialize as quickly as hoped, leading to declines in the dollar’s value.

“In both terms, the election triggered the same initial bet on American reflation,” he explains. “Those factors are catalysts for growth, especially with the curveballs we’ve faced.” This initial optimism often leads to a reversal, only to be followed by a rebound as real economic growth manifests.

Turnquist highlights the importance of interest rates, suggesting that they play a role in dollar dynamics. However, he emphasizes growth expectations as the dominant force behind these shifts.

The Tech Influence: A New Dynamic

A significant factor contributing to the dollar's current strength is the ongoing global interest in American technology, particularly in artificial intelligence (AI) and semiconductor sectors. Foreign investors aiming to tap into these burgeoning markets must convert their local currencies into dollars. This ongoing demand creates a structural support for the dollar that extends beyond political machinations.

“You look at the AI trade, you look at the tech names and you want to own that,” Turnquist notes. “You sell your local currency to go fund dollar purchases.” This phenomenon underscores how the U.S. dollar’s value is increasingly tied to the perception of American technological prowess rather than just domestic policy.

Biden vs. Trump: A Tale of Two Currencies

The contrast between the dollar's trajectory during Trump’s and Biden’s terms is stark. Under Biden, the Dollar Index began at around 90 in January 2021, having dipped to its lowest level since 2018, and surged to approximately 108 by January 2025—a remarkable increase of over 15%. However, unlike the Trump era, the factors driving this surge were largely attributed to the Federal Reserve's aggressive interest rate hikes aimed at combating the highest inflation rates seen in four decades.

This divergence raises critical questions about the nature of currency movements. While Trump’s dollar story revolved around growth expectations and American exceptionalism, Biden’s narrative centered on monetary policy and inflation control.

The Purchasing Power Conundrum

While the Dollar Index may reflect a strengthening currency, it is essential to consider the broader implications of purchasing power. Critics have pointed to a significant decline in the dollar's purchasing power during Biden's tenure, with inflation eroding value even as the index rises. This highlights a crucial distinction: a robust dollar index does not necessarily equate to a thriving economy for average consumers.

Under Trump’s second term, purchasing power has also faced challenges, as inflation remains stubbornly above the Fed’s target. Some analysts even forecast inflation to rise as high as 4%, raising further concerns about the dollar’s real-world implications.

The Reserve Currency Debate

Despite ongoing debates about the future of the dollar as the world’s reserve currency, Turnquist remains skeptical about immediate threats to its dominance. He dismisses the idea of a competing currency displacing the dollar, emphasizing that such a scenario would require not only a viable alternative but also a liquid market comparable to that of U.S. Treasuries.

“China has tried repeatedly to promote yuan-based settlement,” Turnquist points out. “They’ve tried and tried and tried, and you can’t trade in yuan.” Current statistics show that approximately 90% of foreign-exchange transactions involve the U.S. dollar, far outpacing alternatives like gold, Treasuries, or the euro.

While central banks have diversified their reserves, Turnquist argues that there has not been any significant movement away from the dollar that would signal an impending collapse of its reserve status. He acknowledges that fiscal irresponsibility and skyrocketing national debt could raise concerns about the dollar’s long-term viability, but he remains confident that such a shift is not imminent.

The Consumer Perspective: A Split Narrative

An interesting aspect of Turnquist’s analysis lies in consumer sentiment. Data from the Conference Board reveals a stark divide in economic outlook, with Republicans generally expressing confidence in the economy while Democrats perceive it negatively. This polarization is more pronounced than in previous years.

Nevertheless, when examining actual consumer behavior, a different narrative emerges. Spending data indicates that consumers and companies are continuing to invest and spend, regardless of their political affiliations. This gap between perception and action suggests that the dollar’s strength may ultimately reflect underlying economic realities rather than political rhetoric.

Turnquist reflects on this dichotomy: “What it boils down to this time and probably the previous episode is the dollar is the gauge of relative economic strength.” For now, the dollar remains a testament to the enduring narrative of American exceptionalism, even amidst a politically charged and economically complex landscape.

Conclusion: The Dollar's Future

As the dollar continues to follow its pattern, analysts like Turnquist are left to ponder the implications for both domestic and global economies. The structural factors supporting the dollar's strength, coupled with the ongoing demand for U.S. technological innovation, suggest that the currency may remain robust in the near term.

However, the broader implications of inflation, purchasing power erosion, and geopolitical uncertainties loom large. While the dollar's status as the world’s reserve currency appears secure for now, economic realities may reshape this narrative in the years to come. In an ever-evolving financial landscape, the U.S. dollar’s journey will remain one to watch closely.