The “Sell America” Trade | Andy Constan on Why Rest of World Stands to Outperform U.S. Assets
Speakers
Andy Constan
— Founder, Damped Spring Advisors
Jack Farley
— Host, Monetary Matters
Summary
Andy Constan of Damped Spring Advisors explains why he has exited 100% of his US asset positions and moved into developed-market assets outside the US. He argues that enormous financing needs - government deficits, roughly $1 trillion a year of AI capex, and tariff-negotiated onshoring pledges - must be funded by private credit before the spending recycles, creating a near-term headwind for US equities, corporate bonds and long-dated Treasuries. He favors rest-of-world stocks and bonds, expects the dollar to depreciate, expects more Fed cuts and US curve steepening, remains long gold, and sees Japan's bonds, equities and currency as a bottoming opportunity while avoiding US investment grade credit.
- Constan has fully exited US assets, rotating his beta to developed-market stocks and bonds outside the US.
- He sees deficits, roughly $1 trillion a year of AI capex and onshoring pledges as a near-term financing headwind for US asset prices.
- He argues non-US long bonds now yield enough to hedge equities, restoring global diversification and risk-parity balance.
- He expects growth and inflation to undershoot consensus and the Fed to cut more than priced, and he is long curve steepeners and the front end.
- He is long gold, predicts US dollar depreciation, and expects Japanese bonds to recover and strengthen the yen.
- He would not own US investment grade credit because there is no return and supply is rising, and says equities fall before credit.
- He expects semiconductor earnings to shine near term as AI capex recipients, and would short silver only if forced, which he avoids trading.
Ideas
Buy rest-of-world assets over US assets
He has liquidated 100% of his US asset beta because the risk premium available in a US 60/40 portfolio is lousy relative to the rest of the world. Until recently, European, UK and Japanese long-end bonds yielded too little to hedge equities, so a diversified non-US stock/bond portfolio did not exist and capital avoided those assets; now non-US long bonds are investable again, global risk parity is balanced, and the rebalancing away from overweight US positioning and underweight rest-of-world positioning has barely begun. He moved into a currency-diversified developed-market basket roughly 50/50 stocks and bonds, and he notes a developed-market world ex-US ETF (called VA in the transcript) is up 30-40% over the past year and widely outperforming the US market. He also argues the US fiscal impulse has stalled while the rest of the world's growth impulses are just starting.
Semiconductors shine near-term as capex recipients
Near term, he expects the recipients of the AI capex boom - the semiconductor companies - to show spectacular cash flow and earnings, because roughly a trillion dollars of AI capex is contracted and will be spent in 2026 and quarter one looks strong with big capex reports and OBBB tax-refund stimulus. This is a short-term observation that sits alongside his otherwise cautious stance on US assets.
JGBs and Japanese equities look attractive
Japan is a meaningful bottoming story for global beta: Japanese equity valuations remain low relative to the US despite the market's strong run, and the Japanese yield curve has become extremely steep, which he finds compelling. The Bank of Japan is shrinking its balance sheet and is no longer a marginal buyer, so the bond market has been searching for a bid, but Japan's massive savings pool is overinvested in US bonds and stocks and should rotate home; he says there is going to be a bid for Japanese bonds and expects the Japanese bond market to recover relative to the global bond market, even though catching the knife may take time.
Stay long gold as debasement hedge
Gold is doing exactly what it should: dealing with fiat currencies that borrow and spend too much and debase at a fairly rapid rate. He thinks the driver is less central-bank buying, which he believes is on pause because even central banks and sovereign wealth funds care about price, than US portfolio rebalancing into a small market whose buyers are far less price-elastic than sellers, and those flows can continue much longer than expected. He remains long gold at roughly 10% of his beta portfolio as a hedge, trimmed from overweight back to equal weight after the big run, and he would not short it on a dare.
US dollar faces secular depreciation pressure
Currencies are tricky and he is not isolating an alpha currency bet, but he sees significant pressure for the US dollar to depreciate because non-US assets have become newly attractive, and he has removed all US dollar exposure. He describes a secular flow out of US dollar assets, with the US now the most dirty shirt rather than the least dirty shirt because its asset prices are less attractive; short-term bounces of a few percent would not change that.
Yen strengthens as JGBs recover
His view is that the Japanese bond market will recover relative to the global bond market, and that recovery will generate positive flows into the yen and strengthen it. The yen has been weak (roughly 140-160 versus the dollar) and he concedes the move may not happen this week, but he expects the direction of flows to turn supportive as JGB yields normalize.
Avoid US investment grade credit
He would not own US investment grade corporate bonds: with spreads where they are there is no serious return, and the wave of financing supply is a headwind. But he is not bearish on credit spreads - corporations are flush, refinancing is planned well in advance, and making money short credit would require bankruptcies or an equity-driven shock, with equities falling first; shorting high grade credit is a far out-of-the-money put where you bleed, and he would rather buy equity puts if betting against corporate assets.
Fed to cut more than priced
He sees upside for Fed cuts beyond what is priced: the remaining cutting cycle priced into markets is only about 40 basis points, but he expects growth and inflation roughly 50 basis points below consensus, which merits an extra 25-50 basis points of cuts. The front end yields essentially at fed funds, so it is cheap to own; he says he is long SOFR and that the front end can be owned quite easily, and while Trump's desire for lower rates is helpful it is not the reason for the trade.
Long US curve steepeners
He is long US curve steepeners as one of his alpha trades right now. With more cuts than priced likely coming at the front end, the question is whether the long end rallies with it or underperforms; he thinks the odds are the long end must underperform given global financing needs and bond supply, and he likes steepeners of both flavors, whether bear steepening or bull steepening depending on the next Fed chair.
US equities less attractive than rest-of-world
He has exited US equity exposure as part of getting out of 100% of his US assets because rest-of-world stocks are a better deal than US stocks: US risk premia and valuations are rich after years of outperformance, investors are already levered to the gills in US assets, and the borrowing-heavy financing phase is a near-term headwind for US equity prices before the spending recycles into the economy. He is not making a big outright bearish bet right now - he holds some out-of-the-money calls, has traded near-the-money puts, and calls it a sit-on-your-hands environment - but he does a little better if stocks fall 5% than if they rally 5%.
Up Next
This Monetary Matters video, published January 22, 2026, features Andy Constan discussing VEA, IGOV, SMH, Japanese government bonds, EWJ, GLD, USD, FXY, LQD, SOFR futures, 2-Year US Treasuries, US Treasury Curve Steepener, SPY. 10 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Andy Constan · Tickers: VEA, IGOV, SMH, Japanese government bonds, EWJ, GLD, USD, FXY, LQD, SOFR futures, 2-Year US Treasuries, US Treasury Curve Steepener, SPY