Key Takeaways
- • Cambridge Associates recommends global investors consider reducing US equity exposure, as emerging market stocks are on track to outperform developed-market peers for the first time in five years.
- • The US dollar has fallen by as much as 10% this year at one point, ending a decade-long bull run that began in 2011, according to the report.
- • Despite the decline, the greenback remains 32% above its median real valuation, leaving room for further adjustment.
- • Cambridge expects the dollar to decline further in 2026, marking the start of a multi-year bear market.
- • Cited headwinds include uncertainty in economic policy, overvalued assets, and fiscal pressures that could dampen global demand for the dollar.
Summary
Boston-based global investment firm Cambridge Associates says global investors should consider reducing their exposure to US equities, as emerging market stocks are on track to outperform those in developed economies for the first time in five years. The call is tied to a weakening US dollar, which has fallen by as much as 10% this year after a decade-long bull run that started in 2011, according to the South China Morning Post's report on the firm's analysis.
Despite this year's weakness, the greenback still sits 32% above its median real valuation, according to Cambridge, which implies that a substantial part of the adjustment remains ahead. The firm expects the dollar to decline further in 2026, describing the move as the start of a multi-year bear market.
Cambridge attributes its outlook to several headwinds for the currency. These include uncertainty in economic policy, overvalued assets, and fiscal pressures that could dampen global demand for US dollars. For institutional allocators, the view points to a possible shift in relative performance between US and emerging market equities, as well as currency considerations in portfolio construction.
Despite this year's weakness, the greenback still sits 32% above its median real valuation, according to Cambridge, which implies that a substantial part of the adjustment remains ahead. The firm expects the dollar to decline further in 2026, describing the move as the start of a multi-year bear market.
Cambridge attributes its outlook to several headwinds for the currency. These include uncertainty in economic policy, overvalued assets, and fiscal pressures that could dampen global demand for US dollars. For institutional allocators, the view points to a possible shift in relative performance between US and emerging market equities, as well as currency considerations in portfolio construction.
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