Is American exceptionalism collapsing? Raza warns of the collapse of the US dollar myth, Dalio predicts a showdown in Hormuz to reshape the situation.

Senior market strategist Ron Temple from the international asset management giant Lazada said that 2025 marked the formal beginning of the end of the "American market exceptionalism" narrative. Temple stated that as global investors reassess US assets, the continuous and long-term weakening of the US dollar, as well as the steepening of yield curves in US bonds due to continuous international selling, will be significant milestone events with a high probability. Temple's future prospects for investment strategies often spark heated discussions in financial markets. He has accurately predicted the timing of the Bank of Japan's interest rate hike ending negative interest rates in 2024, and successfully forecasted in 2025 that emerging market stocks would significantly outperform US and developed market stocks. Temple warned in an interview with the media on Tuesday that investors should consider significantly reducing the scale/actual exposure of their investments in US stock assets and instead increase allocations to stock markets that have experienced deeper declines, such as the Japanese stock market and stocks from economically resilient emerging markets. Over the past decade, "American exceptionalism" has swept across the globe, with investors in the US market enjoying the best returns globally for a long time. However, since 2025, the idea of "American exceptionalism" has suffered significant cracks. The Trump administration's series of aggressive trade policies and frequent geopolitical conflicts have caused increasing concerns among investors about the risk of the US economy falling into "stagflation" or even a "severe recession". This is also the core logic behind the continuous weakening of US bond assets since 2025. Temple also emphasized the importance of the bond market and pointed out that the US Treasury Secretary Scott Benson has repeatedly stated that the bond market, especially the trajectory of the 10-year US bond yield, is a top priority for the current US government. Temple explained, "The US bond market will indeed become a key market that must be closely watched, as the impact of higher bond yields will quickly transmit to the entire economy and all other asset markets." The strategist pointed out that since late February, short-term US Treasury bond yields have risen significantly, with the US two-year Treasury bond yield (US2Y) rising by 50 basis points and the UK yield soaring by nearly 100 basis points. He noted that the market had been expecting interest rate cuts, but these expectations have now been completely ruled out by the market, leading to a flattening of yield curves in developed markets. Looking ahead to the future of the US bond market, Temple expects that due to increasing fiscal pressures, yield curves will become steeper. These pressures include higher defense spending by the US and more NATO member countries, escalating defense and military spending in the Middle East, and the US government's continued high fiscal deficits and growing interest payments. "In my personal expectation, the US fiscal deficit in the next decade will reach 6.5% to 8% of GDP each year," he emphasized, adding that this will ultimately be a long-term negative catalyst for the stock market. Temple also expressed strong concerns about the weakening safe-haven status of the US dollar. Although this safe-haven currency has been rising in the increasingly tense global geopolitical situation, its gains have started to diminish. "I believe that when we look back at the market situation in 2025, we will all agree that it was the formal beginning of the end of American market exceptionalism," he concluded. Regarding energy prices, Temple pointed out that gasoline futures have nearly doubled, rising from around $1.70 per gallon at the beginning of the year to about $3 now, bringing significant political pressure ahead of the mid-term elections in the US. He stated that the current US government is aware of its ability to influence the market and may be using this leverage to alleviate economic pressures. However, he also warned that the market may be overly optimistic about how quickly the current tense geopolitical situation can be resolved and the expectations for how long it will take to restart and ultimately control the Strait of Hormuz. Ray Dalio: The ultimate battle for the Strait of Hormuz will determine the global power structure The Iranian military has effectively "semi-blocked" the Strait of Hormuz, meaning that about 20% of global energy flow is completely disrupted, accompanied by attacks on oil tankers and interruptions in shipping. A recent study by the International Energy Agency (IEA) shows that the end of February saw a military action by the US and Israel against Iran, leading to the largest supply disruption in the history of the global oil market; at the same time, the US government is considering using military means (including potential ground or quasi-ground control of the island of Harque) to restore shipping lanes and completely control the Strait of Hormuz. Brent crude oil has been hovering and stabilizing around $110 per barrel, no longer experiencing brief wild spikes indicating that high oil prices may be a sustained significant threat, which investors, central bank policymakers, and business leaders have to face. It is reported that Harque Island is Iran's largest crude oil export base, where 90% of Iran's crude oil is exported. Over the past month, the financial markets have been struggling to digest the consequences of this geopolitical war and the energy supply crisis it has caused. In particular, the risk of stagflation has sharply increased, expectations of rate hikes have continued to be front-loaded, and both stock and bond markets have plummeted simultaneously. The US dollar has re-established its safe-haven status, while traders in the stock market are looking for selective opportunities in defense stocks, renewable energy, and Malaysian energy assets. On Monday, Asian stock markets were hit hard, with the MSCI Asia-Pacific index falling by more than 3% and heading towards a technical correction zone. The global bond market also experienced a significant decline under the increasing expectations of stagflation due to high oil prices. As inflation and stagflation concerns continue to rise, gold has wiped out over half of its gains since the beginning of the year. European stock markets have also seen significant corrections, but after President Trump instructed a halt to any military strikes against Iranian power plants and energy infrastructure for five days, European and North American stock indices collectively surged on Monday, while WTI and Brent crude oil prices extended their declines. Legendary investor and Bridgewater Associates founder Ray Dalio warned in his personal column that the current US and Iran conflict over the Strait of Hormuz will be a "final battle" that will not only impact oil prices, but also change the world as we know it. Dalio stated that while there has been talk of reaching an agreement to end the war, both the US and Iran likely know that any peace agreement will not resolve the conflict, as agreements have no value. "Whatever happens next whether it is keeping the Strait of Hormuz in Iranian hands or the US taking control could be the worst phase of the conflict. This final battle will determine the outcome, and it could be of colossal scale." Dalio pointed out that after the Suez Crisis, the UK's global influence rapidly declined. Similar situations have occurred during the decline of the Dutch and Spanish empires: when a dominant power reveals its inability to maintain order on critical TRADELINK pathways, global capital, allies, and political forces often quickly realign.