Is the US riskier than emerging markets?

People living in the United States and using mainly dollars in their personal lives may not fully appreciate the combination of shocks that have unnerved investors elsewhere in the world.

- Jeff Sommer

The first half of the year was a game changer for investors in Europe, Japan and many other countries for whom the instability of the US financial markets was a seismic event.

After years of US outperformance, stocks, bonds and the dollar all experienced painful reversals that were magnified for those holding euros, yen and other currencies.

In fact, calculations by global financial services company MSCI show that for people using Japanese yen or euros, the combined volatility of the dollar and the US stock market in the first half of 2025 made US equities even riskier in some respects than traditionally risky emerging markets. That category includes an extraordinarily diverse range of economies including India, Taiwan, South Korea, Brazil, Mexico, Saudi Arabia and China.

The US stock market has largely rebounded since late April, and that may be masking an unpleasant reality. For global investors, the lagging performance and heightened volatility of US markets this year represent a shift. For most of the last few decades, US financial markets were unquestionably the premier destination, both in terms of relatively high investment returns and low risk.

The advantages of the US remain formidable, and the recent tumult may recede into the background, but because many current problems appear to stem from the policies of the Trump administration, there is ample reason for concern.