Deutsche Bank warned Friday that an artificial intelligence-driven stock selloff could break a decade-old pattern where the dollar acts as a safe haven during market turmoil. George Saravelos, Deutsche Bank's global head of FX research, noted that foreigners own more than $20 trillion of US shares, with roughly 90% of that value attributed to price appreciation rather than underlying buying.
Saravelos said foreign buying now funds the entire US current account deficit. For years, foreigners skipped currency hedging because falling stocks usually lifted the dollar. That dynamic reverses when the shock originates in the US, forcing investors to sell dollars while hedging. The Bank for International Settlements found that non-US investor hedging fed the dollar's slide following Liberation Day, President Donald Trump's April 2025 tariff announcement.
On Friday, the S&P 500 fell 1.28% by mid-afternoon UTC, with Intel down nearly 30% on weak guidance. The US Dollar Index edged up 0.09%, while gold dropped 2.44% and Bitcoin traded lower. Saravelos said the signal to watch is falling US real yields alongside weaker stocks and a weaker dollar, which would signal markets cutting AI spending forecasts. Friday's trading did not show that mix. Saravelos did not predict a crash but said dollar risks are more two-sided than markets have priced in recent weeks.