The gradual decline of the US dollar could act as a powerful catalyst for a global equity rally of up to 20% during 2026, according to Hasnae Taleb, widely known as the “Shewolf of Nasdaq”, a multi-award-winning trader and Managing Partner at Mintiply Capital.
Taleb argues that the era of dollar dominance is entering a structural downturn. Discussions around de-dollarisation, once niche, are now firmly embedded in mainstream financial discourse. After posting its biggest annual drop in eight years (down 9.4% in 2025), the dollar has started 2026 on a softer footing, with several major banks expecting further depreciation at least into the first half of 2026.
“The dollar’s safe-haven status, long underpinned by fiscal discipline and policy credibility, is eroding,” Taleb said, citing expanding fiscal deficits, unpredictable trade policies and increasing global diversification. “What we are witnessing is not a cyclical correction, but the beginning of a secular shift.”
The US continues to run sizeable fiscal and trade deficits. Using U.S. Treasury fiscal data, the debt-to-GDP ratio was approximately 124% in fiscal year 2025, while the federal budget deficit was approximately $1.8 trillion. Against this backdrop, investors are increasingly pricing in long-term currency weakness. As rate differentials narrowed through 2025, markets have continued to price additional Fed easing in 2026.
At the same time, uncertainty around US trade policy is weighing on investor confidence. Protectionist tariffs and industrial policy interventions are fuelling inflation domestically while exerting deflationary pressure elsewhere, widening real interest rate differentials. Central banks have responded by increasing allocations to gold and non-dollar currencies, including the yuan and euro, reinforcing a visible trend towards reserve diversification.
Recent geopolitical developments have added to market unease. President Donald Trump’s tariff agenda and ongoing US–China tensions have been a recurring source of volatility, while investors are also watching the administration’s next Fed chair nomination ahead of Jerome Powell’s term ending in May 2026.
Economist Michael Pettis, senior associate at the Carnegie Endowment for International Peace, has argued that trade imbalances are rooted in deeper structural dynamics rather than tariff policy alone. In his analysis, trade wars distort domestic economic balances, raise prices, compress real returns and ultimately weaken confidence in long-term policy stability—factors that diminish the dollar’s appeal and accelerate de-dollarisation.
From a market perspective, technical indicators are reinforcing this narrative. The US Dollar Index (DXY) started 2026 around 98.3 after a sharp 2025 decline. Whether the move extends further or stabilises will depend on the trajectory of US growth, inflation and the Fed’s reaction function.
A weaker dollar could prove transformative for global equities. Taleb expects a rotation away from highly valued US mega-cap stocks towards international and emerging markets. The MSCI All Country World Index ex-US could rally by as much as 20% by the first quarter of 2026, supported by three key drivers.
First, US equities themselves may benefit mechanically. With approximately 41% of S&P 500 revenues generated overseas, every 10% fall in the dollar has historically added 2–3% to earnings per share, providing a cushion even amid slower growth. Second, non-US equities remain attractively valued, trading at roughly a 30% discount on price-to-earnings ratios compared to US stocks. A weaker dollar could trigger a broad re-rating across Europe, Japan and select emerging markets. Third, emerging economies stand to gain disproportionately, as lower dollar strength reduces debt servicing costs, boosts liquidity and supports commodity prices.
Market data already points to the early stages of this rotation. In 2025, the MSCI ACWI ex USA Index delivered a 32.39% one-year return as of 31 December 2025, outpacing the S&P 500’s 2025 gain of just over 16%. Fund-flow data also reflected a more mixed appetite for US risk: EFAMA reported equity fund flows turned negative in Q3 2025, with the United States accounting for EUR 227 billion of net outflows while Europe still saw EUR 64 billion of net inflows.
However, risks remain. A sharp or disorderly dollar decline could destabilise global markets, disrupt dollar-denominated debt and fuel imported inflation. Some emerging markets with high external debt may experience currency volatility, potentially offsetting the benefits of a weaker dollar. Moreover, if dollar weakness reflects a deeper slowdown in US growth, global demand could soften in tandem.
For the Middle East and North Africa, the implications are significant. A softer dollar would likely support oil and commodity prices, strengthening fiscal balances across the Gulf and providing additional liquidity for sovereign wealth funds. These funds, among the world’s most active investors, are well positioned to increase allocations to regional equities, infrastructure and digital transformation initiatives. While GCC currencies remain pegged to the dollar, imported inflation is expected to remain manageable, and rising non-oil exports could benefit from improved competitiveness.
“In many ways, this could mark the beginning of a new chapter for the region,” Taleb noted. “The erosion of dollar supremacy may well usher in a decade of capital inflows, stronger equity valuations and deeper financial integration across MENA.”
If realised, the global shift away from the dollar could not only reshape international markets, but also position the Middle East as a key beneficiary of the next phase of global capital reallocation.
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