Global investors should consider reducing their US equities exposure as emerging market stocks are on track to outperform those in developed nations for the first time in five years amid a weakening US dollar, according to global investment firm Cambridge Associates.
The recommendation comes as the dollar has experienced significant weakness this year, falling by 10 per cent at one point after a decade-long bull run that started in 2011.
However, the greenback still remains 29 per cent above its median real valuation. “We expect the dollar to decline further in 2026”, beginning a multi-year bear market, Boston-based Cambridge said, citing headwinds from uncertainty in economic policy, overvalued assets, and fiscal pressures that could dampen global demand for the US dollars.
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The weaker US dollar has benefited international stocks. Global non-US equities outperformed US equities by 6.6 percentage points in local currency terms in 2025, and by 13.9 percentage points in US dollar terms.
Cambridge expected this trend to continue and recommended that investors be overweight in global non-US equities in 2026.
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Latin America, which has been an underappreciated market for many years with valuations near 20-year lows, was the stand-out performer in emerging markets, with a 37 per cent year-to-date return on equities. The region was expected to offer further outperformance potential, supported by deeply discounted equity and currency valuations and improving macroeconomic conditions, the report said.
