Money may start leaving the US, find its way to emerging markets in 2025, says Ruchir Sharma

BT India@100: Global market dynamics may witness a seismic shift in 2025. In a session at the BT India@100 event, Ruchir Sharma, Chairman, Rockefeller International, said that a combination of economic policies and inherent market dynamics could trigger a significant redirection of capital from the US to emerging markets, profoundly reshaping the global financial landscape.

The prominent investor and author explained that America did massive stimulus and the effect is wearing off. “2025 could be quite a breakthrough year in which capital begins to leave America because of domestic problems and finds its way into other countries. There’s too much capital over-allocated to America and under-allocated to the rest of the world, and I see that capital switch underway now,” Sharma said.

He added that the US continues to run substantial budget deficits, even amidst economic recovery, with a deficit amounting to 6% of GDP. “The debt-to-GDP level in the US is exploding on the outside. And yet both the candidates are saying deficits don’t matter. What matters is Kamala Harris saying she wants to do more spending. Donald Trump saying he wants to just cut taxes,” Sharma said.

Sharma also pointed out that the US stock market’s proportion of the global market capitalisation, significantly higher than its share of the worldwide economy, highlights an unsustainable concentration of capital.

“50% to 70% of your capital is allocated to America, and that has gone up dramatically over the last 10 to 15 years. That's bound to break, the dollar is bound to weaken and the capital flows are likely to come back to emerging markets including India,” Sharma added adding India’s economic fundamentals remain relatively strong, promising to attract a share of the reallocating global capital.

Other regions such as Eastern Europe, Vietnam, Indonesia, and Mexico also offer substantial growth prospects. Sharma highlighted that Poland has the potential to become the next developed country.

“It is time to spread some capital within emerging markets including India as none of the markets have breadth and depth like the Indian stock market,” Sharma said.