Strategy
A Weaker US Dollar and What It Means for Australian Investors
Christopher Gerace
4 Minutes
Betashares' 2026 outlook sees a weaker US dollar ahead - and why that shifts the case toward Australian bonds, equities and developed ex-US markets.
Global equity markets eased overnight, with major U.S. benchmarks finishing lower but off their worst levels. The S&P 500 snapped a three-day win streak but remains around 0.4% higher for the week, signalling underlying resilience. Volatility remains notably subdued.
The index has traded within its tightest start-of-year range since 1996, with just a 2.67% spread between its high and low closes, suggesting investors are waiting for a clearer macro or policy catalyst. Geopolitics remains a key watchpoint, with a buildup of U.S. forces in the Middle East and renewed pressure on Iran.
For now, markets appear composed, but narrow ranges combined with rising tensions suggest a potential catalyst may be building.
Commentary from Industry Leaders
Last week I attended the Betashares 2026 Investment Outlook. The keynote speakers were Chief Economist David Bassanese, Head of Fixed Income Chamath De Silva and Senior Investment Strategist Cameron Gleeson.
Key Points:
US Growth Still Resilient: 2026 growth is expected to remain solid, driven by:
Ongoing US fiscal stimulus.
Continued AI infrastructure investment.
AI remains a major macro driver, not just a market theme.
Rate Cuts + Policy Divergence
The Fed is expected to cut further if unemployment weakens.
Global central banks are diverging.
A weaker USD is likely - important for Australian investors holding global assets.
Bonds Are Attractive Again:
Sovereign bonds now offer a meaningful yield over cash.
Australian fixed income is seen as offering better risk-adjusted value than US Treasuries.
Equities: Constructive But Selective:
Preference for developed ex-US and emerging markets if USD weakness persists.
The Nasdaq 100 remains structurally strong due to earnings power.
Increasingly positive on Australian equities, supported by commodities.
AI + Geopolitics = Structural Theme
The AI arms race between the US and China continues.
Energy security and supply chains are becoming strategic investment drivers.
Gold remains structurally supported amid geopolitical uncertainty.
Economic News
Business leaders are warning Australia is at a productivity “tipping point,” urging the government to prioritise pro-growth reforms in the May budget. Inflation is running ahead of GDP and wage growth, with real wages falling for the first time in two years.
Key Points:
Long-term data shows capital productivity has declined sharply, and business R&D investment has dropped significantly over the past three decades. Executives are calling for policy reforms to boost innovation, investment, and economic dynamism.
Bottom Line: Without productivity reform, living standards risk further decline.
Market Snapshot
Australia: ASX lower on geopolitical tensions.
United States: Dow -0.5%, S&P 500 -0.3%, Nasdaq -0.3%.
Bonds: US 10-year yield at 4.07% and Australian 10-year yield at 4.78%.
Gold: Increased overnight.
Key Data Coming Up
Friday 20th, February: US GDP (QoQ) (Q4)
Tuesday 24th, February: CB Consumer Confidence Feb (US)
Thursday 26th, February: US Initial Jobless Claims
Investment Update
Earlier this week we were presented with a commercial property opportunity in Melbourne's CBD. The opportunity below is open to wholesale clients only.
Asset Overview:
High-quality, fully refurbished approx. 30,000sqm commercial office building.
Located in the North East precinct of Melbourne CBD.
Anchored by Origin Energy, a leading ASX50 energy company.
Approximately 80% occupied.
18-month rental guarantee on vacant space with active leasing interest.
Blue-chip tenant occupying approx. 50% of the building, remainder multi-tenanted.
The building has already undergone a substantial approx. $25M capex program by the current owner, including significant ESG upgrades and a 5-star NABERS energy, water and indoor environment ratings.
Investment Thesis:
The fund managers believe Melbourne CBD commercial property is approaching an inflection point. New supply is expected to slow materially, while Melbourne continues to benefit from strong population growth. The North East precinct offers materially cheaper economic rents than the Eastern Core, positioning the asset well to capture a recovery in leasing conditions. Importantly, the fund managers intend to cornerstone approximately 40% of the transaction via co-investment through their managed funds, creating a strong alignment of interest.
Indicative Highlights:
Estimated Net IRR of ~15% p.a.
Average cash distribution of ~8% p.a., paid quarterly.
Acquisition at ~45% discount to replacement cost.
~37% discount to reported peak offer.
Attractive 8.5% fully leased initial yield.
Well-supported exit assumptions below current replacement cost and prior peak pricing.
This structure provides the opportunity to acquire a high-quality, core CBD asset at what may be a cyclical low, while targeting value-add style returns through a potential market recovery.
