The “Sell-America” Trade Shakes Markets
While many were unwrapping Easter eggs yesterday, global markets were cracking under the pressure of what is now being dubbed the “sell-America trade.” Investors have been rapidly unwinding the once-hyped “Trump trade” and retreating from the narrative of US exceptionalism. The dollar has weakened again this week (taking its losses to over 9% year-to-date), while US equity markets have come under further pressure.
Safe-haven assets like US Treasuries and the greenback - historically dependable in times of stress – have also suffered. Meanwhile, the Japanese yen – a long position we added last week to the Next Generation Bond Strategy – extended gains towards the 140 psychological level. The other winner has been gold which surged to a record-breaking $3,500 per troy ounce earlier this morning. Investors poured c.$19 billion into gold-backed ETFs in Q1 alone, seeking a hedge against inflation and policy chaos.
Leading the exodus were Japanese financial institutions, dumping over $20 billion in foreign bonds following President Trump’s latest policy volleys. Private Japanese entities alone sold $17.5 billion in long-dated foreign bonds during the week ending April 4, followed by another $3.6 billion the next—marking one of the largest two-week outflows since 2005.
Market jitters intensified after Trump lashed out against Fed Chair Powell on Truth Social, branding him “Mr. Too Late” and calling for immediate rate cuts—just as Powell warned that sweeping tariffs could stunt growth and stoke inflation. This public feud between the White House and the Fed adds another layer of uncertainty for global investors already rattled by erratic trade policy and escalating fiscal risks.
Yet despite the storm clouds gathering over US markets, there is no clear successor to America’s financial throne. The $29 trillion Treasury market remains the world’s deepest and most liquid, the dollar features in roughly 90% of global FX transactions, and it still comprises nearly 60% of central bank reserves. However, with the US dependent on sustained foreign capital to fund its twin deficits—and with foreign holdings of US assets totalling over $30 trillion—a serious unwinding could lead to sustained volatility.
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