Indicators of declining US exceptionalism include recent surges in gold prices, questions surrounding Federal Reserve independence, challenges to sovereignty (Greenland, for example), a weakening USD, and increased US state intervention in the private sector. Even so, the US remains an engine of global growth and a leader in technological innovation, suggesting that moving away from it entirely may be unwise. Taken together, these two truths suggest that multi-asset investors may not want to put all their eggs in a US basket.
 

Investment Implications

Based on the view that US exceptionalism remains intact, investors may wish to consider US, tech, and global equities over the long term. In the shorter term, I believe rotating into US value and small-cap equities may be prudent. In addition, beneficiaries of AI—such as data-center enablers, metals and mining companies, utilities, healthcare services, and select beaten-down asset managers and software firms with low disintermediation risk⁴—may also offer opportunities.

Regarding the concurrent view that US exceptionalism is waning, investors may want to consider non-US equities, including emerging markets, global fixed income, commodities and/or gold, as well as value and quality exposures within the US as part of a multi-asset allocation.

Across either scenario, investors could also look to potential opportunities in dynamic fixed-income and credit strategies. In a complicated and often contradictory market environment, an active approach may help managers identify investments that can withstand these dynamics.

AI, Capital Intensity, and the Future of US Equity Returns
Andrew Heiskell, Equity Strategist

From an equity-market perspective, US exceptionalism refers to the meaningful and consistent outperformance of US equities relative to the rest of the world since the GFC. During this period, strong fundamentals drove that outperformance, and a consistently strengthening USD was supportive.

Over time, the return on equity of US companies relative to their developed-market peers has continued to widen, driving what could be described as “exceptional” earnings growth. While the technology sector has accounted for a significant share of US equity-market outperformance, margin expansion and earnings growth have been broad-based across the market. And although US valuations have expanded, they have largely been supported and justified by this fundamental strength.

The second truth, however, raises important questions. Can the US sustain this growth and return gap? Has the period of relative outperformance vs. the rest of the world peaked, or is it peaking now? It’s certainly possible. The US equity market today looks very different from what it did 50 years ago. At that time, capital-intensive manufacturing and industrial sectors formed the backbone of the market. As the historically capital-light technology sector took hold, the runway for growth expanded dramatically. Today, by contrast, rapid growth in AI-related capital expenditures⁵ is raising questions about the future returns on that invested capital.
 

Investment Implications

More broadly, as US policies shift away from the prior global order, other countries are likely to respond by encouraging greater domestic resilience and economic strength. As a result, global equity-market correlations may continue to break down, increasing dispersion and creating potential opportunities for stock selection. Within the technology sector, as AI drives greater capital intensity among incumbents, some companies may adapt effectively, while others may begin to lag.

Together, these dynamics support the case for an active approach to equities. The flexibility of active management may better position investors to capitalize on opportunities created by rising dispersion, while avoiding companies or sectors that risk going stale in today’s evolving market environment.

The gradual weakening of the US dollar reflects an erosion of the post‑GFC status quo.

Fixed Income and the Limits of Dollar Strength
Amar Reganti, Fixed-Income Strategist

For me, the theme of US exceptionalism is closely tied to the USD and the US Treasury market. Over the past year, the general trend has been a gradual weakening of the USD, representing an erosion of the status quo that many investors have experienced since the GFC.

Here, too, there are two truths at play. The USD’s status as the world’s reserve currency is supported by the world’s largest and most liquid financial markets, a deep supply of safe assets in the form of US Treasuries, strong institutional credibility, and its entrenched role in global trade, commodities, and financial infrastructure. At the same time, the infrastructure and foundations for future multilateral currency arrangements are being established.

Investment Implications

Against this backdrop, fixed-income investors might consider diversifying beyond the US through global sovereign and currency strategies, including those found in traditional global bond markets. Another potential avenue is emerging-markets local currency debt (EMD), which posted a strong year in 2025 and may offer return opportunities for fixed-income investors.

That said, if investors choose to allocate to EMD, it should be driven by fundamentals and yield considerations, not solely as a play on USD weakness. In any case, given the uncertainty and heightened anxiety in this space, adaptable and actively managed approaches may be worth considering.

Why the World Feels More Unsettled—and What It Means for Markets
Thomas Mucha, Geopolitical Strategist

It’s no coincidence that US exceptionalism has coincided with a period of US geopolitical dominance. For years, the US led the world in infrastructure, military capability, and diplomatic influence. That stability gave US financial markets room to grow and outperform global peers.

Today, we appear to be in the midst of a transition, moving from a relatively stable geopolitical cycle to one marked by turbulence and uncertainty. There may be no clearer example than the recent conflict in the Middle East. Such events are likely to accelerate global fragmentation, reduce policy cohesion, and reinforce a worldwide policy focus on national security.

Several additional factors are contributing to this geopolitical shift. Intensifying competition between the US and China is challenging America’s role as the world’s leading power. The number of active conflicts worldwide is unusually high, many of them in climate-sensitive regions. Supply chains are also being reconfigured. When considered together, these dynamics suggest that market risk is structurally higher today than it has been in recent memory.


Investment Implications

Geopolitical cycle shifts like the one unfolding today tend to occur only once per century, and they are often disruptive. But they can give rise to ongoing and novel opportunities to identify potential winners and losers. In our view, investors may be better positioned by focusing less on headlines and social-media commentary, and more on observable signposts and underlying structural change.

Great-power competition and shifting supply chains are supporting several notable investment themes across both public and private markets. These include defense and defense technology, critical minerals and rare earth elements, biotechnology, cyber defense, and climate and energy resilience. We’re also likely to see greater dispersion across regions, countries, asset classes, industries, and individual companies—conditions that have historically been well suited to active management.