Rohit Goel, Partner at Breakout Capital and an expert in global macro trends, dives into the overlooked risks of U.S. fiscal deficits, arguing they could mislead investors into focusing solely on American markets. He highlights emerging opportunities in under-invested regions like Europe and Latin America, emphasizing the importance of country selection in these markets. Rohit also connects potential shifts in capital flows with economic reforms, revealing that successful investing in emerging markets hinges more on national policies than sector choices.
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insights INSIGHT
US Fiscal Deficit Risk
US fiscal deficits at 6.5-7% of GDP are a major understated risk to global markets.
This fiscal vulnerability may trigger higher risk premiums and capital outflows from US assets.
insights INSIGHT
Global Capital Flow Imbalance
Global capital flows have overwhelmingly favored US big tech in the past 15 years.
Europe, Japan, and emerging markets have been starved of investment and represent potential beneficiaries of rebalancing flows.
volunteer_activism ADVICE
Emerging Markets Investment Advice
In emerging markets, prioritize country selection as it drives 65% of returns.
Adopt a long-term 2-5 year horizon due to liquidity and market cycle challenges.
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The global investment landscape is shifting beneath our feet, yet most investors remain fixated on US markets. Rohit Goel, Partner and Head of Global Macro at Breakout Capital, reveals why this myopia could prove costly in the years ahead.
Rohit drives home an alarming point: US fiscal deficits running at 6.5-7% of GDP during economic expansion represent an understated risk that markets have largely ignored. "If it is any other country on this planet, you would see a reaction, whether in bond yields or currency," he explains. This fiscal vulnerability could eventually force global investors to demand higher risk premiums on US assets, catalyzing capital flows toward international alternatives.
Where might this capital flow? Rohit points to markets starved of investment for fifteen years – Europe, Japan, and particularly emerging markets. Latin America stands at an inflection point with elections potentially delivering reform-minded leadership across major economies. Poland's investment-focused policies create another bright spot, while frontier markets from Nigeria to Sri Lanka implement meaningful reforms after pandemic-era financing constraints forced hard choices.
Perhaps most valuable is Rohit's framework for emerging market investing: "In emerging markets, 65% of returns are attributable to country selection." Unlike developed markets where sector selection drives performance, getting the country right is paramount in emerging spaces. And while liquidity remains challenging, patient investors with two-to-five-year horizons stand to benefit as capital eventually follows performance.
Rohit also dispels a common misconception about dollar cycles. The currency's likely depreciation over the next several years represents a normal economic cycle unrelated to reserve currency status. Since 1975, the dollar has experienced multiple significant bear markets without losing its position in the global financial architecture.
For investors willing to look beyond US borders, the coming years may offer extraordinary opportunities in markets long overlooked by global capital. The question is whether you'll position yourself ahead of this potential sea change or chase it after it's already underway.
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