Way back two months ago, I posed a question: “How ironic would it be if ‘US exceptionalism’ in all its various manifestations peaked in 2024 and began to wane during the first year of Donald Trump’s promised American renaissance?”

The quote’s from “What If Trump’s American ‘Golden Age’ Is A Sunset?“, published January 31. Fast forward eight weeks and guess what? US stocks just underperformed their European counterparts by the most on record.

As the figure below shows, US equities lagged European stocks during Q1 to the tune of almost 17ppt, a result that would’ve seemed unthinkable at the beginning of the year.

Let me see if I can anticipate the “5D chess” narrative: This was in large part due to German equities, and German stocks are bid because Trump compelled Berlin to shake off the fiscal straitjacket, so in fact, the worst quarter for US stocks relative to European shares was indeed by Trumpian grand design.

Whatever, right? A better way to conceptualize the situation is to take politics out of it and consider Europe a fiscal expander, versus America’s efforts to downsize federal payrolls and government more generally. You want to be long the fiscal expansionists and short (or underweight) the fiscal contractionists.

That’s how Nomura’s Charlie McElligott likes to frame things, and I think it’s a useful lens through which to view both performance and flows. If you missed the latest flows update, you can find it here. As I put it Friday, this past week was very pronounced from a “RoW > US” perspective. US equity-focused ETFs and mutual funds saw a $20 billion outflow while every other region saw a net inflow, including a seventh straight for Europe-focused funds.

The figure on the left, above, gives you some context for that $20 billion outflow from US stocks — it was a 1%ile event. The figure on the right shows the percentile ranking for the one-month flow into European equities — a 99%ile influx.

In his latest, BofA’s Michael Hartnett thanked Trump for — and this is a real quote — “help[ing] prompt Europe to solve its 21st century dependence on China for exports, the US for security and Russia for energy.”

I mean, accurate or not, are we just trying to run roughshod over decorum now? Thank you, President Trump, for “solving” Europe’s most vexing problems by abandoning America’s allies in their time of need, forcing Germany to borrow hundreds of billions (in a currency they don’t issue by the way) to build weapons.

Hartnett went on to note that Europe’s defense spending needs will be “very big.” Germany, France and the UK only have three quarters of a million military personnel between them, he remarked. That may not be enough to beat back the orc hordes.

Investors love it. Fiscal outlays, I mean. They also love to gamble on empty promises from the CCP. The figure on the left, below, from Charlie, gives you a sense of the magnitudes when it comes to investor allocation shifts.

The figure on the right, above, is just EPFR’s equity flows data split into US and non-US flows, and then plotted with a rolling two-month change.

For what it’s worth, at least some PMs are skeptical that “Liberation Day” is actually going to represent the clearing of tariff event risk. “I think more people are now questioning and challenging the idea that April 2 is some sort of ‘forward clarity’ day,” McElligott said, somewhat gingerly, adding that this Wednesday is “instead now being viewed by a lot of folks as ‘The End Of The Beginning’,” where that means it “only kicks off a daisy chain of retaliatory tariff escalations.”

Yes, rather than an event-risk clearing session, market participants are coming around to the idea that “Liberation Day” is “The End Of The Beginning.” Just like they’re slowly but surely coming around to the distinct possibility that rather than a “forward clarity” event, Inauguration Day 2025 was The Beginning Of The End.