Greed & Fear: Jefferies’ Chris Wood predicts end of US market dominance, bets on Asia, defence stocks

Global equity landscape is undergoing a paradigm shift, with Jefferies’ Christopher Wood anticipating a long-term decline in US market dominance, weakening of the dollar, and a reallocation toward Asian assets and defence plays.

In his latest GREED & fear report titled "The End of an Era", Christopher Wood, Global Head of Equity Strategy at Jefferies, declared that the American equity market has likely passed its peak influence. He pointed to the technical breakout of the MSCI All Country World ex-US Index—unchanged since 2007—as strong evidence of this shift. As of December 2024, US stocks accounted for 67.2 percent of the global index, despite representing just 26.4 percent of global GDP in nominal terms and 14.9 percent on a purchasing power parity basis.

Wood argued this disparity suggests a structural overvaluation of US equities and foretells a longer-term weakening of the US dollar. He said, “This is technical confirmation of GREED & fear’s continuing base case,” suggesting that the global market cycle is now favouring non-US assets.

US Dollar Weakness Expected Amid Fiscal Deterioration

According to Wood, the dollar’s decline is inevitable due to several catalysts. One is political: former President Donald Trump’s preference for a weaker dollar and his unpredictability regarding economic policy, particularly tariffs. Another is structural: the unsustainable fiscal path taken by the US government post-Covid. The resulting pressure could lead to financial repression and yield curve control—both of which are bearish for the greenback.

He noted, “The most important reason to assume a long-term weakening of the US dollar is America’s extreme fiscal deterioration,” which could result in capital restrictions and currency controls.

Asian Currencies Poised for Long-Term Strength

In stark contrast to the US dollar, Wood projected long-term appreciation for Asian currencies. This, he argued, would be a reversal of the post-Asian Crisis currency devaluation that persisted for three decades. He pointed to the region’s strong savings rate, with emerging Asia recording 39 percent of GDP in gross national savings in 2024 compared to just 17.3 percent in the US, as per IMF data.

He cited Trump’s mercantilist policy stance and the region's financial prudence as core reasons for sustained currency strength across Asia.

Defence and Bank Stocks in Europe to Gain

Wood’s bullish stance extended to European equities—particularly defence and banking stocks. With Germany planning to increase its defence spending to 5 percent of GDP, Wood emphasized this as evidence that Europe is “waking up” to its geopolitical responsibilities. He reaffirmed a long-standing pair trade: long European defence stocks and short American ones. The MSCI Eurozone Aerospace & Defense Index has outperformed its US counterpart by 31 percent since December 2024.

GREED & fear continues to advocate holding European banks, citing improved loan growth in countries like Greece and Spain, where credit expansion has resumed after a prolonged downturn.

Private Equity, Credit and Systemic Risks

While celebrating the market’s recent rebound, Wood warned about the underlying fragility in private equity and credit markets. He noted that the S&P Listed Private Equity Index dropped 27.1 percent during a risk-off period and flagged systemic risks due to the growing bank exposure to non-bank financial institutions (NBFIs). Loans to NBFIs hit USD 1.2 trillion in March 2025—a 20 percent year-on-year jump.

He warned that “private equity and private credit will be the big losers in any US downturn,” with top institutions like Harvard and Yale already attempting to offload billions in PE exposure. Regulatory concerns are also mounting, as the IMF noted over 40 percent of private credit borrowers had negative free cash flow at the end of 2024.

Big Tech and AI Capex Bubble?

Wood also raised concerns about the ongoing AI-driven capex boom in Big Tech. Despite massive spending, he questioned the long-term viability of these investments, calling them potentially a “misallocation of capital.” He cited decentralized AI alternatives such as Tether’s upcoming QVAC platform as potential threats to the current tech hegemony, which he described as "surveillance capitalism."

Still, GREED & fear is keeping a hedged position by maintaining a 4 percent allocation in Nvidia, down from 7 percent at the end of 2023.

Ukraine War and Geopolitical Uncertainty

On geopolitical risks, Wood critiqued the Western media’s emphasis on ceasefires in Ukraine. He reiterated that Russia remains firm on four conditions for peace: Ukraine’s neutrality, cessation of Western arms shipments, recognition of Russian territorial control, and full troop withdrawal by Ukraine. He suggested the US, particularly Trump, holds more leverage over the conflict by controlling funding, rather than military support.

A Strategic Reallocation for Investors

Wood’s comprehensive outlook is clear: investors should brace for a rebalancing of global equity power away from the US. With American fiscal stability in question, Big Tech potentially overextended, and geopolitical risks on the rise, he advocated a rotation toward Asian currencies, European defence, and select global value plays.

His global portfolio reflects this thesis with top holdings in names like Capricorn Metals (Australia), BYD and Tencent (China), Zomato and ICICI Bank (India), TSMC (Taiwan), Petrobras (Brazil), Societe Generale (France), and Freeport-McMoRan (US). His only US tech holding remains Nvidia—a strategic hedge in the unfolding AI arms race.

Wood’s thesis in GREED & fear: The End of an Era is a clarion call for investors to adapt to the shifting tides of global finance. As the US’s market dominance wanes, the next chapter of investment leadership may be written from Asia and Europe.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.