By Julien Le Noble, CEO of Asia
For decades, the U.S. dollar was the unshakable foundation of global portfolios. That foundation is shifting, and for institutions reviewing portfolio construction, current market conditions have brought these questions into sharper focus.
The U.S. Dollar Index fell 9.4% in 2025. Nearly 10% of the world’s reserve currency evaporated in a single year, and the slide has continued into 2026, with the dollar recently hitting a four-year low. For most investors, this is not background noise. It is a seismic shift. Yet many portfolios, particularly those with a heavy U.S. bias, were never designed to withstand it.
When the dollar weakens by nearly 10%, two things happen simultaneously. First, the purchasing power of every dollar-denominated asset declines relative to other currencies. Second and more critically, investors holding only U.S. assets miss a powerful dynamic entirely. International equities in 2025 benefited from both stronger underlying earnings and a currency tailwind. For holders of European, Japanese, or Asian assets, dollar weakness translated directly into higher returns upon conversion. A U.S.-only portfolio captured none of that upside, only the drag of a depreciating base currency. In other words, 2025 was a live demonstration that single-market concentration is a risk, not a strategy.
For years, the gravitational pull of U.S. markets made it easy to overlook what the rest of the world had to offer. That era is ending. Tariffs, trade disputes, and policy uncertainty have made U.S. assets harder to evaluate. The post-Cold War order is fragmenting, with capital flowing away from the West toward regions with more durable long-term growth stories. Financial institutions have already priced escalation and de-escalation policy scenarios into markets, preparing for the one certainty they have: volatility. The perception that U.S. assets carry structural risk is now a mainstream concern. The world is no longer waiting for the U.S. to stabilise. Capital flows have shifted, and institutions are reassessing their allocation frameworks accordingly.
Asia is home to some of the fastest-growing economies on the planet, an expanding middle class driving consumption and capital formation, and deepening markets with improving corporate governance. If the next decade of global growth plays out in Asia, a view reflected in projections from institutions including the IMF and World Bank, the question for financial institutions is not whether Asia matters. It is whether your portfolios are positioned to benefit from it or merely observe it.
Clients already understand the intellectual case for global diversification. They have seen the 9.4% decline. They have watched international equities outperform. They know that no single country or currency will dominate forever. What they need now is not another explanation but rather a genuine path to action. Institutions that can offer exposure to Asian and other non-U.S. markets may be better positioned to address client concerns around dollar concentration. Whether and how such exposure is appropriate depends on individual client circumstances and suitability assessments. For APAC partners, the infrastructure to act on this shift already exists. Many institutions already have a front-row seat to Asia’s growth story. What remains is the decision to build portfolios that reflect the world as it is becoming, not as it used to be.
The forces driving dollar volatility, such as geopolitical fragmentation, policy uncertainty, and shifting capital flows, are structural, not cyclical. The case for diversification is not going away either. Diversification across geographies is increasingly being evaluated not only as a risk management tool but as a means of accessing a broader range of market exposures.
In 2025, broad market data reflected those dynamics. Whether that distinction between portfolios that adapt and those that do not persists into 2026 and beyond is the question every institution should now be examining.