“The dollar is our currency, but it’s your problem.” ~ John Connally, United States Treasury Secretary under President Richard Nixon, 1971

For more than a decade, investors have benefited from what many came to call “U.S. exceptionalism”: which is an environment where the U.S. equity market, the U.S. dollar, and U.S. Treasury markets consistently outperformed other similar assets globally. Supported by technological leadership, deep capital markets, and a powerful reserve currency, global capital has been flowing, almost reflexively, into U.S. assets. But the foundations of that exceptionalism have shown signs of strain.

The challenge is not growth. America remains one of the most innovative economies in the world and will likely remain so well into the AI-era. The challenge is financing. The United States is running historically large fiscal and current account deficits simultaneously. This so-called twin deficit dynamic is emerging at a time when government debt issuance continues to accelerate, forcing Treasury markets to absorb ever larger supply. In response, investors are increasingly demanding a higher term premium, the additional compensation for holding longer-dated U.S. debt. The result is structurally higher bond yields, tighter financial conditions, and one could reasonably expect lower valuation multiples for risk assets.

At the same time, foreign ownership of U.S. financial assets sits near record levels. For years, this was a source of strength. Today, it represents a vulnerability. If global reserve managers, sovereign wealth funds, or international investors begin diversifying even modestly away from the U.S. – whether for valuation, geopolitical, or strategic reasons – the implications could be profound.

This is where de-dollarisation matters. We do not believe the U.S. dollar is facing collapse. Not yet anyway.

Rather, we believe 2026 may mark the next phase of gradual erosion in its dominance, as bilateral trade agreements, commodity settlements, and reserve diversification continue outside the dollar system. A weaker dollar would likely ease financial conditions globally, creating a tailwind for risk assets. Emerging market equities, local currency bonds, and real assets in particular.

In such an environment, assets such as gold, which carry no sovereign liability, may continue to benefit – not merely as an inflation hedge, but as an alternative store of trust. At the same time, we see emerging markets (EM) currencies and EM equities as the primary beneficiary as these economies benefit from improved liquidity and stronger funding tailwinds.

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