The US dollar had its worst first-half performance in 52 years, sparking concerns about its future. However, experts believe the decline is within historical norms and the dollar remains in a bullish trend. Factors like economic strength and limited de-dollarization efforts support the dollar as the reserve currency. Despite recent weakness, the dollar may be gearing up for a strong rally.

The S&P 500 closed positively amid stretched valuations and rising inflation concerns. Optimism about a Federal Reserve rate cut boosted AI-related stocks, while a rotation into cyclical sectors was observed. Next week’s inflation and earnings reports will be crucial for market direction. Investors should prepare for increased volatility and monitor sector leadership for signs of rotation.

Market statistics show overbought conditions with a need for rebalancing towards more conservative holdings. The fear/greed index is at extreme greed levels, signaling the importance of risk management. Real estate and utilities underperformed, while technology and consumer discretionary were leaders. Gold and technology sectors are overextended, prompting profit-taking and rebalancing.

As markets reach record highs and investor complacency grows, it’s crucial to manage risk and rebalance portfolios. Taking profits in overbought sectors, maintaining core exposure, and monitoring macro developments are key strategies. Despite a bullish outlook, the market is priced for perfection, making risk management essential.

Read more at Investing.com: Is the US Dollar Setting Up for a Comeback Rally?