For more than a decade, U.S. financial markets have enjoyed a status few rivals could challenge—dominant equity returns, a strong dollar, and Treasurys widely viewed as the world’s safest asset. But according to Ron Temple, Chief Market Strategist at Lazard, that era may be approaching its turning point.
Temple believes 2025 could be remembered as the year American exceptionalism in markets began to fade, driven by mounting concerns over monetary credibility, ballooning federal debt, and shifting investor psychology.
“I think this year is the beginning of the end of American exceptionalism in markets,” Temple said in an interview with CNBC this week. “We’re probably going to see it first in currency, and then increasingly in other risk assets as we move into 2026.”
A Shift in Global Confidence
American exceptionalism has long been underpinned by a unique combination of economic growth, deep capital markets, institutional stability, and the U.S. dollar’s dominance as the world’s reserve currency. Temple argues that cracks are now emerging in several of those pillars simultaneously.
“What’s different now,” he explained, “is that investors are questioning not just valuations, but the macro framework that supported U.S. outperformance for years.”
According to Temple, global investors are beginning to reassess whether U.S. assets still deserve the premium they have commanded since the aftermath of the global financial crisis.
Federal Reserve Credibility Under Scrutiny
One of the most pressing concerns weighing on sentiment is the credibility of the Federal Reserve. The central bank has already delivered three interest-rate cuts this year, even as inflation remains above its long-term 2% target.
At the same time, President Donald Trump has publicly urged the Fed to cut rates more aggressively—raising fears that political pressure could undermine the central bank’s independence.
“The Fed is trying to walk a very narrow path,” Temple noted. “They’re balancing a cooling labor market against inflation risks, while markets are questioning whether monetary policy is becoming politicized.”
For global investors, any perception that the Fed’s inflation-fighting resolve is weakening could reduce confidence in U.S. assets—especially bonds.
America’s Growing Debt Burden
Equally concerning to investors is the scale of U.S. government borrowing. The national debt surpassed $38 trillion this year, reinforcing long-standing fears about fiscal sustainability.
Temple pointed out that this debt trajectory may explain why Treasury yields have remained elevated despite rate cuts by the Fed. “Markets are pricing in future inflation and heavier borrowing,” he said. “That’s not a vote of confidence.”
If deficits continue to widen, investors may demand higher compensation for holding U.S. debt—eroding the long-held perception of Treasurys as a risk-free benchmark.
“Frankly,” Temple added, “I think when we look backward, we’ll say 2025 was the first year in many people’s lifetimes when U.S. Treasurys were viewed more as a credit asset than a risk-free asset.”
Currency Markets May Move First
Temple believes the earliest signs of declining U.S. dominance will appear in currency markets, rather than equities or bonds.
Based on conversations with institutional investors, he says many are already exploring currency hedges to reduce exposure to the U.S. dollar—without immediately selling U.S. assets outright.
“Currency is the easiest lever to pull,” Temple explained. “You can stay invested in U.S. markets while quietly dialing down your dollar exposure.”
Such moves could mark the first phase of a broader portfolio reallocation away from the U.S., particularly if confidence in the dollar’s long-term stability begins to wane.
From Hedging to Selling
While Temple does not expect a sudden exodus from U.S. markets, he warned that currency hedging could eventually evolve into outright selling of American assets—including Treasurys and equities.
Investors got a preview of that dynamic earlier this year, he said, when President Trump’s tariff announcement triggered a sharp selloff in both U.S. stocks and government bonds.
“That was a glimpse of what happens when confidence cracks,” Temple said. “If those moments become more frequent, the shift away from U.S. assets accelerates.”
Wall Street Is Rethinking U.S. Dominance
Temple’s assessment is increasingly echoed across Wall Street. Once-unquestioned assumptions about U.S. market superiority are now being challenged by some of the world’s largest financial institutions.
In a recent note to clients, Goldman Sachs warned that U.S. equities could deliver among the weakest returns globally over the next decade, as valuations normalize and fiscal pressures mount.
Similarly, forecasters at Bank of America and Apollo Global Management have raised the prospect of a “lost decade” for U.S. stocks, with the S&P 500 potentially delivering near-flat returns over the next 10 years.
“These aren’t fringe views anymore,” said a senior portfolio manager at a global asset manager. “The debate has shifted from if U.S. outperformance ends to how and how fast.”
A Turning Point Year?
Temple emphasized that the decline of American exceptionalism does not imply economic collapse or an immediate market crisis. Rather, it suggests a rebalancing of global capital after years of U.S. dominance.
“The U.S. isn’t becoming uninvestable,” he said. “But it may no longer be the default, no-questions-asked destination for global capital.”
If history looks back on 2025 as a turning point, Temple believes it will be remembered as the year investors began questioning long-held assumptions about U.S. safety, stability, and superior returns.
“This might be the first chapter of a new market regime,” he said. “And once regimes change, they rarely revert quickly.”
