US exceptionalism: can innovation counter the dollar's decline?

The macro

• US exceptionalism has delivered – but cracks are showing: Fiscal stimulus and energy independence drove recent strength, but fading tailwinds and rising debt raise question about what comes next.
• Dollar dominance faces new pressures: The US remains central to global finance, but fiscal risks and trade tensions could gradually weaken its position – with implications for investors globally.

The market

• US innovation still leads – but the gap is closing: AI and large-cap technology continue to drive returns but rising debt and intensifying global competition raise questions about long-term dominance.
• Emerging markets ex-China stand out: With China cooling and Europe losing momentum, emerging markets outside China offer attractive opportunities across both equities and local bonds.

The managers

• Investors are getting more precise with US exposure: Flows show a shift from broad allocations to targeted strategies – including mega-cap ETFs, global ex-US and thematic AI.
• AI investment is accelerating – with revenues set to follow: With AI capital expenditure set to hit $1 trillion by 2028, the focus is shifting from hype to fundamentals – and identifying the real beneficiaries is key.