Experts warn of structural shift as weakening dollar, rising Treasury yields, and investor exodus reshape markets .With the US dollar weakening and Treasury yields soaring, experts warn of a fundamental global financial shift as investors retreat from US assets, raising questions over the dollar’s dominance.
The weakening of the US dollar and a sharp rise in Treasury yields are fuelling growing speculation that the global financial order may be undergoing a historic transformation. According to Marc El-Lazidi, Chief Investment Officer at Jesmond Mizzi Financial Advisors Limited, recent developments signal far more than temporary market fluctuations — they point to what could be a structural shift away from the dollar’s long-standing dominance.
“The trajectory of the dollar is clearly downward, and that’s not accidental,” El-Lazidi explained. “It aligns with the Trump administration’s objective to revitalise US industry by making exports more competitive.”
However, a weaker dollar brings broader implications. It has already strengthened the euro, fuelled demand for gold, and prompted investors to explore alternative stores of value such as cryptocurrencies. “This is what happens when trust in the dominant currency begins to erode,” he added.
Rising yields on US Treasuries — with 10- and 30-year bonds reaching levels not seen since 2007 — are exacerbating concerns. El-Lazidi noted that once-enthusiastic buyers of American debt, particularly in Asia, are pulling back. Japanese investors, for example, traditionally turned to US Treasuries during periods of near-zero domestic rates. But with Japanese yields now on the rise, the incentive to buy American bonds has faded.
China remains a significant holder of US debt, yet ongoing geopolitical tensions complicate its position. “The question is: if traditional buyers back away, who steps in? That’s a real issue,” El-Lazidi warned.
The high-rate environment is also reverberating through Europe and Asia. Although the European Central Bank has begun cutting rates, global financial conditions remain tight, with borrowing costs under pressure. Meanwhile, Japan’s gradual exit from ultra-low interest rates has effectively dismantled the long-standing carry trade — the practice of borrowing in low-yield currencies like the yen to invest in higher-yielding assets abroad.
The recent downgrade of the US credit rating has added fuel to investor anxieties. “Fiscal indiscipline isn’t just a macroeconomic problem — it impacts day-to-day life,” El-Lazidi cautioned, pointing to higher mortgage rates, rising loan costs, and tighter credit conditions for American households.
Amidst these developments, capital is flowing out of the US into European markets. European equities, particularly the Euro Stoxx 50, are outperforming in some respects, reflecting what El-Lazidi describes as “a genuine paradigm shift.” Endowments, pension funds, and other institutional investors are adjusting their portfolios accordingly, in what appears to be a strategic long-term reallocation.
The erosion of the carry trade is further complicating US debt financing, as Japanese investors — traditionally major buyers of US assets — grow more risk-averse and shift towards shorter-term, domestic instruments.
For American investors, diversification is becoming critical. “The era of home bias may be ending,” El-Lazidi observed. With traditional safe havens like large pharmaceutical companies facing political pressures — notably President Trump’s aggressive stance on drug pricing — even defensive sectors are no longer immune to uncertainty.
Asked whether these developments mark the beginning of a multipolar economic order, El-Lazidi was unequivocal. “Yes, and it’s driven by more than just economics,” he said, pointing to global efforts to reshore supply chains and reduce reliance on single-country production hubs.
Trump’s vision for domestically produced consumer goods, from iPhones to pharmaceuticals, may not be immediately realistic, but it reflects a broader global trend. “The world is getting more complex, and investors need professionals who can help them cut through the noise. Because right now, there is more noise than clarity,” El-Lazidi concluded.
