The dollar's decline, particularly in April, was not driven by investors divesting from US assets. Instead, it was caused by investors with large, unhedged dollar exposures belatedly adding hedges. This involves selling dollars in the spot or forward markets, creating downward pressure without actual asset sales.

The U.S.'s outsized share of global market capitalization is partly driven by its culture of high stock ownership. With more citizens invested in equities compared to other countries where cash is prevalent, the U.S. benefits from a compounding effect that widens the global wealth gap over time like an "alligator jaw," creating a self-reinforcing cycle.

Current market chatter about reduced demand for U.S. assets is not a sign of a sudden de-dollarization crisis. Instead, it reflects a slow, rational diversification by global investors who are finding better relative value in other developed markets as their local interest rates rise.

While politicians tout the S&P's rise, it's misleading. The US market ranks near the bottom (20th out of 21) of Western markets in recent performance. When factoring in the dollar's 10% decline against foreign currencies, the S&P has significantly underperformed its global peers in Europe and Asia.

Howard Lutnick reframes the trade deficit as a long-term transfer of national wealth. The U.S., an "inventor island," pays a "producer island" for goods, which then uses that money to buy up the inventor's assets. The key metric is the $26T net negative international investment position, not just the flow of goods.

Despite talk of de-dollarization, the US remains the only market offering superior returns due to its productivity advantage. Recent ex-US outperformance was a short-term anomaly based on perceived geopolitical risks in the US, not a fundamental shift. When seeking returns, capital must ultimately flow to the US.

The classic "stocks down, dollar up" correlation is weakening. A J.P. Morgan model shows that relative US equity underperformance (dollar-negative) is currently offsetting the effect of an outright global equity decline (dollar-positive). This dynamic leads to only modest moves in the dollar despite stock market stress.

American market dominance has been heavily financed by foreign savings. As geopolitics shift, countries like Japan and Germany will likely repatriate that capital to fund domestic priorities like defense and energy, creating a significant, underappreciated headwind for U.S. assets.

A shrinking U.S. trade deficit, largely due to non-monetary gold exports, means fewer dollars are recycled back into U.S. assets. This is a significant headwind for highly-owned stocks like the Magnificent Seven, as a key source of foreign capital inflow is drying up.