Remember Back in the Days? This Isn’t That
There are moments in markets when leadership rotates.
And then there are moments when the entire regime shifts.
2025 was a regime shift.
The relationship between the U.S. dollar and emerging markets broke — and flipped. Not for a quarter. Not for a trade. Structurally.
And when that happens, capital moves.
As Biggie said:
“Remember back in the days, when niggas had waves…”
That’s how most investors think about cycles. They remember how it used to work. They anchor to the last regime. They assume the same playbook applies.
But markets don’t care about nostalgia.
The Dollar Is the Axis
Emerging markets don’t move in isolation. They move against the dollar.
When the dollar strengthens, liquidity tightens. Capital flows back to the United States. Commodities stall. Emerging markets compress.
When the dollar weakens, everything inverts. Liquidity expands. Commodity-producing nations strengthen. Local currencies rise. Equity multiples re-rate.
That relationship is not opinion. It is structural.
And the inflection point was clear.
iShares MSCI Brazil ETF bottomed in January 2025.
Invesco DB US Dollar Index Bullish Fund peaked that same month.
Exact timing.
That’s not coincidence. That’s a regime break.
That was the moment we went heavy into emerging markets. Because when the dollar cycle changes, portfolio construction changes with it.
Biggie put it plainly:
“Things done changed.”
And they did.
2025 Was the Tell
Last year wasn’t just a good year for emerging markets. It was confirmation.
Most emerging markets outperformed the United States in 2025. Several countries rallied over 100% off their lows, while SPDR S&P 500 ETF Trust finished up roughly 17%.
That’s not noise.
That’s capital reallocating.
And here’s what’s important: the move did not fade.
All year we were told the trade wouldn’t last. That it was temporary. That U.S. exceptionalism would quickly reassert itself.
But price never confirmed that narrative.
And price is the only vote that counts.
Leadership Is Broadening
Look at the current leadership.
Brazil.
Latin America 40.
Mexico.
Peru.
Brazil small caps.
Emerging Markets ex-China.
This is not one country squeezing higher. This is regional participation.
Strong YTD returns.
Strong one month relative strength.
Price above long-term moving averages.
That’s not fragile.
That’s structural continuation.
Biggie said:
“The game done changed.”
And this is exactly what that looks like in markets.
The leadership board is no longer dominated by U.S. mega-cap growth. It’s being challenged by commodity-producing nations and emerging economies.
Latin America, in particular, is showing persistent relative strength — and that matters.
Because when strength broadens, it signals durability.
Latin America Could Be the Big Winner
If the dollar continues lower — and structurally it appears to be in a downtrend — Latin America becomes one of the highest conviction expressions of that shift.
Brazil already broke out.
Mexico is participating.
Peru is strong.
Regional ETFs are climbing the ranks.
This is not a late-cycle blow-off move.
This is early-cycle expansion.
And here’s something professionals understand: the rotations that begin early in the year often define the year.
New capital gets deployed in January. Allocations reset. Risk budgets refresh. When leadership shows up at the start of the year and persists, it’s rarely random.
It’s positioning.
Biggie said:
“You never thought that hip-hop would take it this far.”
Most investors didn’t think emerging markets would take it this far either.
But structural shifts don’t reverse because sentiment is uncomfortable. They reverse when price breaks.
So far, price hasn’t.
The dollar remains under pressure.
Emerging markets remain above trend.
Latin America remains at the top of the leaderboard.
The Bigger Point
At a certain point, trades are here to stay.
Not forever.
But long enough to matter.
The dollar topped.
Brazil bottomed.
Capital rotated.
Leadership expanded.
That’s structure.
And when structure changes, you adapt.
Because as Biggie reminded us:
“Things done changed.”
The dollar cycle changed.
Global capital flows changed.
Emerging market leadership changed.
And if the dollar continues lower, Latin America may not just participate this year.
It may lead.
