Country Risk on a Continuum

Country risk is spreading across the developed-emerging divide, so investors should assess countries on a changing continuum and diversify by national exposure.

• Lazard defines a triple-down day as a session when a country's main equity index falls, its 10-year government bond yield rises, and its currency weakens against the US dollar.
• Across OECD countries over the 20 years to 2025, the US, Japan, the UK, and Germany recorded the fewest triple-down days, while Türkiye, Mexico, Colombia, and Poland recorded the most; Italy ranked fifth.
• The UK's five highest annual counts occurred from 2021 to 2025, with a peak in 2022 during the fiscal credibility and inflation shock under Liz Truss.
• During the March 2026 energy shock linked to the Iran war, Germany recorded the most triple-down days in the sample while the US recorded one of the fewest, reflecting Germany's energy dependence and US energy self-sufficiency.
• Over the past decade, triple-down days increased in developed markets while remaining stable or declining in emerging markets, and the US, euro area, and China generated roughly three-quarters of the increase in global debt over the previous year.

Takeaway: Country diversification has become more important because sovereign credit, political, geopolitical, and structural risks are rising across developed markets; emerging-market debt can complement emerging-market equities because their indexes cover largely different countries, with the equity index concentrated in Taiwan, South Korea, and China while emerging-market sovereign debt spans roughly 70 countries.