The Trump administration is focusing on reducing trade deficits with other countries, particularly in goods. This has implications for US-denominated assets, as a decrease in the current account deficit would likely lead to a lower capital account surplus, affecting Treasury yields and equity prices. As the US dollar has been artificially strong due to global demand for US assets, foreign investors may begin to sell these assets in anticipation of a shift in valuations. Key data shows that foreign asset managers are already exiting US-denominated assets, particularly during European and Asian market sessions. This trend suggests that investors should consider moving away from US-denominated assets as the current account deficit unwinds, which could reverse the demand dynamics that have supported US asset valuations historically.

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