Will the last investor to leave America please turn out the lights

When market veterans gather, the talk often turns to memorable crashes: Where they were in 2020, 2011, 2008, 1998, or for the older among them, 1987. Last week should join that list. Where were you when investors fled America?

- James Mackintosh

The week was full of thrills that will be more fun to look back on than they were for those trying to trade them. Stocks had among their biggest-ever two-day drops and one of their largest one-day rises, whipsawing investors. Meanwhile, the dollar plunged and Treasurys flashed warning signs of deeper trouble.

But what really stood out was the combination of moves, the flight from American assets in general. Stocks, bonds and the dollar all sold off at once.

There was a lot more going on than just day-traders buying and selling on Truth Social posts. Investors who want to plan for the future need to take a view on three distinct drivers of what happened: trade, debt and de-Americanization.

Trade, or rather President Trump's attack on it, provided the basic reason to sell. His delay of the bizarrely calculated additional tariffs on countries other than China offered midweek relief, and Friday night's exemption for iPhones and other electronics will offer further respite. But investors quickly went back to working out the damage from the tit-for-tat trade war across the Pacific. That is in addition to his baseline tariff of 10%, even on countries with which the U.S. runs a trade surplus.

Stocks naturally fell as Wall Street strategists upped their probability of recession. The S&P 500 ended the week higher than it started but remains well down from the tariff announcement the previous week. Notably, the dollar and Treasurys continued selling off even as stocks rebounded.