If you can discern a theme du jour amid rampant macro ambiguity in the early days of 2023, the prevailing market narrative revolves around the notion that rest-of-world exposure may be preferable to US equities.

To the extent one side of that trade is predicated on a negative view of large US tech firms, that side feels a bit “late.” 2022’s bear market was a tale of multiple compression catalyzed by sharply higher rates, and that obviously impacted high-growth shares disproportionately. Mega-cap US tech was hit especially hard.

If the valuation contraction phase is nearly over, and bond yields retreat (or merely stabilize), you could make the case that high quality long-duration stocks (e.g., America’s tech titans) are due for a rebound.

Even after last year’s fireworks, those stocks are still dominant at the benchmark level, so if they stabilize, the “broad” US market might too.

But that’s an out-of-consensus view. Instead, most seem to favor Overweights in European shares (basically a value trade with a kicker from better growth outcomes versus worst-case energy crisis fears) and Chinese assets amid the country’s “COVID zero” exit.

Indeed, European equity funds enjoyed an exceedingly rare inflow during the latest weekly reporting period, according to EPFR’s data.

At the same time, EM equities saw the largest inflow since February of 2021, when the Hang Seng Tech Index peaked, and nearly the largest weekly inflow in recent history.

I’m not sure I’m buying the narrative figuratively, even if I might literally. For one thing, China is a wildcard. You’re “gambling on Mao,” as I put it this week, and while the lockdowns may be over, the regulatory environment is impossible for foreigners to reliably navigate. Indeed, even domestic companies are often blindsided by shifts in Party priorities, and at some point, the tension between the world’s two superpowers will probably boil over. Hopefully, that doesn’t entail a military conflict, but it could dead end in some manner of financial sanctions regime that makes Chinese assets an even riskier proposition for Western investors than they already are. The fate of emerging market assets is inextricably bound up with China’s fate.

As far as Europe is concerned, I’ll confess I’ve never been enamored with the investment thesis. The eurozone is a currency union with no common fiscal framework, a conjuncture I continue to believe is a recipe for eventual dissolution. Frankly, it’s a miracle it’s lasted as long as it has. Beyond that, the European economy never struck me as an especially vibrant beast. Moreover, there’s a war going on, if you didn’t notice, and although Europe’s security is ultimately guaranteed by the full faith and credit of the US government, that doesn’t preclude periods of devastation — when something goes wrong across the pond, it takes us a while to get over there, and then a while longer after that to set things right. Something is currently going very wrong, and it’s by no means out of the question that the conflict will eventually spill across Ukraine’s borders.

Bottom line: We live in an increasingly dangerous world where autocrats are testing their boundaries. That seems like an odd time to be abandoning US assets in favor of those exposed to the perils of life in the 2020s.

And yet, the paradox is that some of the dangers are inflationary, which argues for a shift in secular leadership. For almost two decades secular leadership was the purview of US mega-tech, the sponsor of the US exceptionalism trade. “[The] shift from deflation assets to inflation assets is a conviction trade,” BofA said this week. “Like Japan 1990, US internet 2000, US/EU banks 2007 and BRICs & resources 2011, tech & FAANG [may] underperform in coming years,” the bank wrote, adding that the inflationary macro regime suggests the new leadership will be commodities, non-US stocks, small caps over large caps and value over growth.

Have a look at the simple chart below. You can take it back decades and with the exception of the period between 2003 and 2007, it looks pretty much the same. To call the inflection in global shares ex-US relative to the US-inclusive gauge “nascent” would be to materially understate the case. This is in its infancy.

That could mean there’s a long way to go, and thereby lots of money to be made. Or it could just be one more head fake in a long history of false dawns. BofA called the alleged inflection point marked by the red dot “a biggie.”

The bank did concede that an economic hard landing might “temporarily hurt” the secular leadership shift, but said any pause would “also provide the next great entry points.”

As for the idea that US tech might benefit from some aspects of 2023’s early macro narrative du jour, Goldman’s David Kostin suggested that, at best, it’d be a wash. “Revenue exposure to Asia is in part linked to US end demand, where the outlook has not changed materially [and] the sector’s long duration versus the index means its returns are particularly vulnerable to interest rate risk,” he said late Friday. “Rising real rates represent a counter-balance to the tailwind of China reopening for Info Tech, and we remain neutral on the sector.”

Again: Consensus isn’t optimistic on a return to the US mega-tech exceptionalism trade. Of course, the narrative could shift in the blink of an eye. “We are in the trickiest part of the investment cycle: Tightening is ending but easing is far from beginning, inflation is over but recession has not yet begun, China is reopening [but] the US [faces] recession,” BofA’s Michael Hartnett said. “Little wonder Wall Street narratives are changing quicker than a TikTok video.”