Weekly Market Pulse: The Crossroads

2025-07-07 04:00:00 ET

The first half of this year saw a lot of old trends turned upside down. Foreign stocks outperformed US stocks, gold had its best first-half performance since 2007 and the dollar its worst start to a year since 1973. It was that year that the Bretton Woods system of fixed exchange rates breathed its last. It had started to come undone 2 years before when Nixon closed the gold window, instituted wage and price controls and imposed a universal 10% tariff, in what became known as the “Nixon Shock”. The Smithsonian Agreement, signed in late ’71, was an attempt to manage the decline of the dollar, but by early ’73 it had failed and the G-10 countries let their currencies float against the dollar – which proceeded to fall nearly 15% by mid-year. Stocks fell too, the S&P 500 down almost 12%, while gold rose 88%. That change, from fixed exchange rates and a quasi-gold standard, was a dramatic and radical change....

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