Managing investment risk has never been more important. Award-winning financial advisor Mark Cortazzo shares his strategies for avoiding, transferring and mitigating market risk to avoid permanent losses.

Worrisome possibility:
„.. Foreigners own $8.5trn of government debt, a bit under a third of the total; more than half of that is held by private investors, who cannot be cajoled by diplomacy or threatened with tariffs. America must refinance $9trn of debt over the next year. If demand for Treasuries weakens, the impact will quickly feed through to the budget, which, owing to high debts and short maturities, is sensitive to interest rates.
What would Congress do then? When markets collapsed during the global financial crisis and the pandemic, it acted forcefully. But those crises required it to spend, not to impose cuts. This time it would need to take an axe to entitlements and raise taxes quickly. You need only consider the make-up of Congress and the White House to see that the markets might have to impose a lot of pain before the government could agree on what to do. As America dithered, the shock could spread from Treasuries to the rest of the financial system, bringing defaults and hedge-fund blow-ups. That is the sort of behaviour you would expect in an emerging market……“

A currency is only as good as the government that backs it. The longer America’s political system fails to grapple with its deficits or flirts with chaotic or discriminatory rules, the more likely will be a once-in-a-generation upheaval that pushes the global financial system into the unknown. Wherever things settled, the greenback’s diminished role would be a tragedy for America. True, some exporters would benefit from a weaker currency. But the dollar’s primacy reduces the cost of capital for everyone, from first-time homebuyers to blue-chip firms.
Biting the hand that funds
The world would suffer because the dollar has no equal—just pale imitations. The euro is backed by a big economy, but the euro zone does not produce enough safe assets. Switzerland is safe but small. Japan is big, but has its own vast debts. Gold and cryptocurrencies lack state backing. As investors tried one asset and then another, the hunt for safety could bring about destabilising booms and busts. The dollar system is not perfect, but it provides the stable ground on which today’s globalised economy is built. When investors doubt America’s creditworthiness, those foundations are in danger of cracking.

Two comments.
Volatility creates opportunities.
Injecting daily politics as a basis for investment analysis isn't a good choice.

Heightened volatility due to massive uncertainty increases the likelihood of a serious

"accident."
It's unwise to ignore the ramifications of executive branch actions which forcefully inject politics
into the business/economic realms.

The U.S. dollar is an early casualty of President Donald Trump’s us-against-the-world trade war. The dollar has lost almost 10 percent of its value since Inauguration Day, with more than half of decline coming this month after the president’s decision to lift taxes on imported goods to their highest level since 1909.
The weaker dollar — now near a three-year low against the euro — is bad news for Americans traveling abroad and could also aggravate inflation by making foreign goods more expensive. U.S. exporters, however, should gain.
“The administration’s approach to policy and its lack of transparency in terms of motivations have all led to a distinct sense of unease in financial markets,” said David Page, head of macro research for Axa Investment Managers in London, which manages $1 trillion in investments. “It doesn’t look like what we have been used to in terms of well-thought-out policy.”
Those concerns last week sent investors fleeing from the dollar and U.S. government securities, historically a haven during financial crises. This week, after markets quieted, Treasury Secretary Scott Bessent dismissed those concerns. In an interview Monday with Bloomberg Television, he said there was “no evidence” that foreign investors were abandoning U.S. assets, saying they had been active participants in recent auctions of government debt.
“The dollar is incredibly entrenched in the global financial system in ways that no other currency is. Importing, exporting, borrowing, hedging, using the dollar for collateral, all of these things that major actors in the international economic system use the dollar for, would be so difficult to modify,” said Paul Blustein, author of “King Dollar: The Past and Future of the World’s Dominant Currency.”
As the president’s enthusiasm for tariffs made the United States look riskier, investments in other markets became more attractive. In Europe, the German government last month abandoned a constitutional borrowing limit and made plans to spend heavily to spur the economy and fund a military buildup, raising growth prospects. China encouraged higher consumer spending to better balance its export-heavy economic model. And Japanese 10-year government debt offered its highest return in 15 years.
Recent gains by the Swiss franc, the euro, Japanese yen and gold, which is up more than 7 percent in the past five trading days, support the idea that investors are looking for new ways to ride out the turmoil unleashed by the president.
Yet for major institutional investors, giving up on the dollar is not feasible. The $28 trillion Treasury market is the world’s largest and most liquid, meaning that investors can quickly sell their holdings if they need to raise cash. In contrast, there are only $1.4 trillion in German government bonds outstanding. Alternative currencies likewise fall short. The Chinese yuan is assuming a greater role in global commerce. But the Chinese government does not allow capital to move freely across its borders, meaning investors could find their funds trapped.
The euro also is handicapped. Nations that use the euro share a central bank in Frankfurt, which governs the zone’s monetary policy. But they lack a common fiscal authority akin to the U.S. Treasury and a common bond market.
Even if the era of global dollar supremacy survives the trade war, the currency’s short-term outlook might be poor. Trump’s imposition of widespread tariffs has made a recession more likely, economists say, which could hurt stock prices and prompt the Federal Reserve to cut interest rates. That would make investing in dollar-based assets less appealing.

It's interesting when people use pretzel logic in an attempt to somehow justify Trump's terrible tariffs.
The tariff "plan" is clearly absurd (e.g., rate calculations, taxing uninhabited islands)
and it was implemented haphazardly. Communication from administration officials regarding tariffs
was often either nonexistant or contradictory. Most credible economists and financial professionals
believe the end result will be higher inflation, increased unemployment, and lower GDP.
Regardless of how some people "spin" these tariffs, it was an extremely imprudent act
which heightened global financial risks and alienated major US allies.
The art of reasoning is an art which often take decades to acquire.

The sudden loss of confidence has been stark in the US Treasury market, widely considered to be the most important in the world because investors normally use it as the “risk free” benchmark to determine the price of every other financial asset.
In the sharpest weekly move since 1982, the yield – in effect the interest rate – on 30-year US government bonds rose from about 4.4% to 4.8%. The yield on 10-year bonds has also risen.