The recent recalibration in global capital flows is a significant development that many did not foresee. Following Trump's policies, there's been a notable shift as Wall Street embraced US exceptionalism, particularly in tech stocks, amidst fiscal deficits. However, this trend is reversing, with the MSCI USA index losing ground compared to the MSCI World index, as the US economy surprises on the downside while other nations improve. Trump's trade threats led European nations, particularly Germany, to increase investment in defense and infrastructure significantly, impacting capital flows and euro/USD rates. Similarly, Japan's bond yields have reached a 20-year high, attracting capital back home from US assets. Bridgewater's CIO Greg Jensen warns that it is risky to be overexposed to US assets as marginal buyers become sellers, suggesting that a substantial shift in global finance is only beginning. This movement highlights the slow transition of large capital and the repercussions of past policy decisions.

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