By Global investors may be witnessing a historic turning point in how the world views US financial assets, according to Ron Temple, chief market strategist at Lazard.
In a recent CNBC interview, Temple argued that 2025 marks “the beginning of the end of American exceptionalism in markets,” as foreign investors reassess the overall safety, stability, and relative attractiveness of US assets.
According to him, a combination of shifting global yields, weakening confidence in the US fiscal management, and changing currency dynamics is reshaping a long-held assumption that American assets are the safest for investment.
Here’s a comprehensive explanation of why that mindset is beginning to change heading into 2026.
Treasuries are no longer treated as risk-free
Temple highlighted a striking development: US treasuries are beginning to behave like ordinary credit assets rather than the world’s ultimate safe haven.
He pointed to market behaviour earlier this year when negative economic news led investors to sell treasuries instead of buying them for protection.
“For the first time in many people’s lifetimes, we saw US Treasuries viewed as a credit asset more than a risk‑free asset,” he said.
This shift undermines a foundational belief in global finance – that the US government debt is the safest place to hide during uncertainty.
Weakening dollar is changing global investment behaviour
A major theme in Temple’s analysis is the growing expectation of a weaker US dollar.
He noted that many foreign investors are now actively increasing their currency hedge ratios to reduce exposure to the greenback.
“What I’m hearing from investors globally is that they’re looking for opportunities to increase their hedge ratios, to reduce their exposure to the US dollar,” he said.
Concerns driving this shift include unsustainable fiscal deficits, questions around the rule of law, and uncertainty about the Federal Reserve’s independence.
A weaker dollar would erode returns for unhedged foreign holders of US assets, making them less appealing.
Japan’s normalization threatens US assets demand
Japan’s monetary tightening is emerging as a major pressure point for US markets.
With the Bank of Japan expected to lift overnight rates toward 1% by late next year and 10‑year Japanese government bond yields nearing 2%, Japanese investors may find domestic bonds more attractive than US Treasuries once currency hedging is factored in.
Speaking with CNBC, Temple warned that Japan – a net creditor with $3.7 trillion invested abroad – could begin repatriating capital.
“There’s a risk that you could see Japan repatriating some of that money back to their domestic market,” he said, a move that could steepen the US yield curve and tighten credit conditions.
Massive foreign ownership becomes a vulnerability
Foreign investors collectively hold $8.6 trillion in US Treasuries, along with even larger positions in American equities and corporate credit.
Temple cautioned that this concentration of foreign ownership is becoming a structural risk.
While he does not expect immediate large‑scale selling, he believes the first shift will occur in currency hedging behavior – a precursor to more significant reallocations.
“One risk is that those investors decide to sell their US assets,” he said, noting that even modest changes in foreign demand can have outsized effects on yields, liquidity, and market stability.
US macro mix is no longer uniquely attractive
Temple argued that the US economy is losing the macroeconomic advantage that once set it apart.
He expects unemployment to “grind higher” through 2026, while inflation rises again in the first half of the year due to tariff‑driven price pressures.
At the same time, fiscal deficits remain large, and long‑term yields are behaving unpredictably. “It’s not clear to me how long the end of the curve will respond,” he said, pointing to recent increases in 10‑year yields.
With other markets – from Japan to Europe – offering improved risk‑reward profiles, Temple is urging investors to allocate more outside the US heading into 2026.
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