Ron Temple, Lazard’s chief market strategist, believes that global investors are witnessing an historic shift in the way they view US financial assets.
Temple stated in a CNBC recent interview that the year 2025 will mark the “beginning of the end for American exceptionalism on the markets,” when foreign investors begin to reassess overall stability and attractiveness, as well as the safety of US assets.
He said that a combination between shifting global yields and waning confidence in US fiscal management as well as changing currency dynamics has reshaped the long-held belief that American assets were the most safe for investments.
This is a complete explanation as to why this mindset will begin to shift in 2026.
Treasuries no longer risk-free
Temple highlighted an interesting development. US Treasury bonds are starting to act more like credit assets than as the ultimate safe-haven for investors.
He cited the market behavior earlier in the year, when investors sold treasuries rather than buying them to protect themselves from bad economic news.
He said that for the first time, in most people’s lives, US Treasuries were viewed more as an asset of credit than one without risk.
The shift in the global financial landscape undermines the belief that US government debt was the best place to hide from uncertainty.
Weakening dollar is changing global investment behaviour
Temple’s analyses are dominated by the expectation that the US dollar will weaken.
He said that foreign investors have increased their hedge ratios in order to minimize exposure to the dollar.
He said that investors around the world are looking to decrease their US dollar exposure by increasing their hedge ratios.
This shift is driven by concerns about unsustainable fiscal debt, the state of the law and the independence of the Federal Reserve.
The weaker the dollar, the less attractive US assets would be to foreigners who do not hedge their investments.
The US is threatened by Japan’s asset demand
Japan’s tightening of monetary policy is putting pressure on US markets.
Japanese investors might find that domestic bonds are more appealing than US Treasuries after currency hedges have been taken into account.
Temple told CNBC that Japan, a country with $3.7 trillion in foreign investments and a net creditor status, could start repatriating its capital.
He said that there was a possibility that Japan could repatriate some of this money to its domestic market, which could result in a steepening of the US yield curvature and tightening credit conditions.
Foreign ownership is a major vulnerability
The US Treasury is held by foreign investors in an amount of $8.6 trillion, with larger amounts in American stocks and corporate debt.
Temple warned that the concentration of foreign ownership was becoming a risk to structural stability.
He does not anticipate large-scale sales, but he thinks the first change will be in currency hedge behavior. This is a prelude to larger reallocations.
He said that the risk was that these investors would decide to sell US assets. Even modest changes in demand from abroad can have a large impact on market yields, liquidity and stability.
US macro-mix is no longer unique
Temple claimed that the US economy has lost its macroeconomic edge that set it apart in the past.
Tariff-driven pressures on prices will cause inflation to rise again in the second half of this year, he says.
However, the fiscal deficits continue to be large and long-term returns are unpredictable. He said that he was unsure how long the 10-year yields would continue to rise.
Temple urges investors to invest more in markets outside of the US, from Japan to Europe.
This article The US asset is the safest option: Market expert warns could be updated as new information becomes available.
