The gradual decline of the US dollar could act as a powerful catalyst for a global equity rally of up to 20% by early 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. Market projections point to a potential 15% depreciation of the dollar by the first quarter of 2026, signalling a significant reallocation of global capital away from US-centric portfolios. Morgan Stanley Research has echoed this view, forecasting a further 10% decline in the currency by the end 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, with federal debt expected to exceed 120% of GDP and annual shortfalls approaching $2 trillion. Against this backdrop, investors are increasingly pricing in long-term currency weakness. Recent interest rate cuts by the Federal Reserve have further reduced the dollar’s yield advantage over major peers such as the euro and the yen. JP Morgan expects additional rate cuts in 2025 and 2026 as economic momentum slows, undermining one of the dollar’s key supports.
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 has expressed optimism about securing a trade agreement with China by late October 2025, despite escalating tensions over tariffs and rare-earth exports. While Washington has announced new strategic partnerships to secure critical minerals, the risk of further tariff escalation continues to cloud the outlook, particularly for US agriculture and manufacturing.
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) has broken decisively below its 15-year upward trend, trading around 96–97. Technical models suggest a potential move towards the 85–88 range, marking what many see as the end of the dollar’s long bull cycle and the start of a prolonged bearish phase.
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. The Morningstar Global Markets ex-US Index rose 17.3% through July 2025, outperforming US equities by nearly nine percentage points. US equity funds recorded $23 billion in outflows during the same month, while international funds saw sustained inflows. Global ex-US small- and mid-cap funds have returned nearly 25% year-to-date, reflecting growing investor appetite for undervalued opportunities.
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.
Follow us on
