US Resilience Resilient

Our long-standing recommendations of overweighting US equities and staying invested, despite periodic turbulence, have served our clients well over the past 16 years. Yet clients are now asking whether it is time to reduce exposure to US equities in favor of other developed and emerging markets, while also taking a more active approach to entering and exiting US equities.

Their concerns follow widespread market tumult in 2025, triggered by US tariffs, a large budget deficit and rising debt-to-GDP trajectory, growing geopolitical tensions with China and warnings of an equity market bubble, among other factors. This tumult contributed to a 9% decline in the US dollar and the outperformance of several financial markets outside the US relative to the US in 2025. It also led to a steady stream of headlines bemoaning the erosion or even the loss of “US exceptionalism.”

This is not the first time that declinists—those who foretell the decline of the US—have come out in such force. We explain in this year’s Outlook why we expect them to be proven wrong yet again.

In Section I of the report, we examine the key drivers of US Preeminence to determine whether they have been negatively impacted by the tumult of 2025. They have not. US Preeminence endures thanks to the country’s unparalleled economic, human capital, and financial market strengths, paired with a system of checks and balances and remarkable resilience.

We then analyze the real and perceived vulnerabilities of the United States, focusing on its supply chain dependence on China, its rising debt-to-GDP trajectory and potential threats to the rule of law and system of checks and balances. While reliance on China for key inputs is a real vulnerability, we argue that the US remains far from the tipping point of unsustainable debt-to-GDP levels, and that the rule of law and system of checks and balances remain robust.

We proceed to address the question of whether US equities are in a bubble and conclude that artificial intelligence is a contributor to, but not the sole driver of the US economy, its earnings, and equity returns. We also explain why we do not recommend clients use gold or bitcoin as a hedge in their portfolios.

We then reexamine our rationale for a US equity overweight and for staying invested. We explain that the faster and more reliable earnings growth potential of US companies, relative to global peers, leads us to retain our recommendation.

Continuing in Section I, we present our one- and five-year expected total returns for key asset classes and for the dollar. We also review our tactical tilts going into 2026 and discuss the risks to our outlook, before concluding with our key takeaways.

In Section II, we present our economic outlook for key developed and emerging market countries, while in Section III we detail our financial market outlook for these countries, as well as our outlook for the US dollar and key commodities.

This is our 18^th annual Outlook. Preparing it has been a herculean but very rewarding undertaking. We have gained great insight and tremendous knowledge from experienced professionals in different fields with dramatically different views, reflecting the deep divisions in the country. We have incorporated these insights and knowledge into our analysis.

For now, we do not see any compelling reason to shift our view of US Preeminence and Staying Invested. We hope that after reading this report, you will agree.