The American stock market threw one heck of a party after Trump's election victory. I mean, it was something to behold—the Dow hitting fresh records, Bitcoin shooting past $90k, and MAGA enthusiasts declaring economic vindication before Trump even picked his new Cabinet.
But hang on a second. Something interesting—and much less discussed—has been happening outside our borders.
The dollar? It's been quietly sliding downward since election night. Foreign stock markets? They're actually outperforming American equities. And international investors have been dumping U.S. Treasuries like they're yesterday's news.
It's almost like... well, like the rest of the world looked at those trillion-dollar deficit forecasts and massive tax cut promises and collectively said, "Thanks, but we'll park our money elsewhere."
The evidence isn't subtle. While we've been debating whether Trump's tariffs will be 10% or 20%, foreign investors have essentially imposed their own tax by marking down American assets.
Take currencies (always my favorite economic tea leaves to read). The dollar index has dropped roughly 5% since voters went to the polls, with particular weakness against the yen. That's not typical behavior for markets anticipating robust economic growth—it's what happens when markets see storm clouds of bigger structural deficits and policy unpredictability on the horizon.
Look, I've covered market reactions to political transitions since 2008, and there's a pattern worth noting. When domestic political enthusiasm and international capital flows move in opposite directions, it's usually the money flows that tell the more honest story in the long run. Political excitement packs an emotional punch but lacks financial staying power; capital movements represent cold, dispassionate assessments of where the best risk-adjusted returns might be found.
Here's the thing about fiscal expansion through tax cuts when the economy's already running hot—it doesn't create new growth out of thin air. It just borrows growth from the future and leaves a nasty debt hangover. Sophisticated global investors understand this math all too well.
(And no, this isn't some partisan observation. Similar patterns emerged during previous administrations—from both parties—that tried to juggle fiscal stimulus and protectionism simultaneously. The political rewards come quickly, while the economic costs accumulate gradually... often becoming somebody else's mess after the next election cycle.)
Meanwhile, what are corporate insiders doing? Despite their companies' public cheerleading for Trump's proposed tax cuts, insider selling has accelerated to levels we haven't seen since 2021. When executives are unloading personal holdings while their PR departments issue bullish statements about tax policy... well, draw your own conclusions.
Markets are fundamentally reflexive—they incorporate information about both economic realities and other participants' perceptions. The post-election rally created its own momentum narrative that became self-reinforcing, but that doesn't mean it's built on solid economic foundations. The dollar's persistent weakness suggests international investors are placing a very different bet.
One indicator I find particularly telling: foreign direct investment into the U.S. has been slowing dramatically. This isn't just hot money or speculative trading positions—it's long-term capital commitments. When sophisticated international allocators start redirecting their structural investments elsewhere... that's worth paying attention to.
The prevailing wisdom says Trump's policies will be unambiguously pro-growth and pro-market. But the markets themselves—if you look beyond the headline numbers—seem to be reaching a more nuanced verdict. Certain sectors will likely benefit tremendously (explaining the divergent performance among domestic industries), while America's position in the global economy might simultaneously weaken.
There's a bitter irony here. The "America First" policy approach seems to be triggering a "sell America first" response from international capital allocators. And in today's interconnected financial system, that matters—a lot.
I'm not predicting doom and gloom—just pointing out that the market response to Trump 2.0 is considerably more complex than what you're hearing from TV pundits. The same policy mix that has day traders on social media celebrating is giving sovereign wealth funds and global pension managers serious heartburn.
So what's the smart play? These market divergences create interesting opportunities. The weakening dollar means international equities might continue outperforming, especially in export-driven economies that could grab market share if U.S. trade policy becomes more restrictive. The steepening yield curve suggests banks and financial stocks could keep their hot streak going.
But maybe the most valuable insight is simply recognizing that euphoria rarely leads to sound investment decisions. When markets send contradictory signals—as they absolutely are right now—the wise move might be to diversify rather than double down.
After all, if international investors are quietly reducing their American exposure... perhaps American investors should consider following suit, at least with a portion of their portfolios. Sometimes the smartest trade is just refusing to accept someone else's positioning at face value.
