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1. The panic selling of U.S. stocks and bonds following the tariff bombshell may be over, but the re-rating of American assets is just getting started.

Money managers are aware that even a modest reduction in exposure could have a potentially huge impact on asset prices.

That's both because of the sheer size of U.S. markets relative to total global assets, and the outsized nature of overseas investors' U.S. holdings in nominal terms and as a share of their portfolios. For instance, the global pension fund industry, which is significantly overweight U.S. assets, is worth around $58.5 trillion.

The concern is not that we will see blanket selling of U.S. assets by foreign investors or that the dollar will no longer be considered the world's reserve currency. Those scenarios will probably not happen in our lifetimes.

But we are likely to see modest shifts that could have major price impacts.

Anecdotal evidence suggests some Canadian and European pension funds that have baulked at the Trump administration's trade, economic and wider policy agendas, have already started reducing exposure to U.S. assets. They won't be the only ones. "I think the coming months will see global portfolios moderately reduce U.S. allocations, more so overseas investors than domestic U.S. investors," says Rebecca Patterson, former chief investment strategist at Bridgewater Associates. If global investors do trim their U.S. holdings, there will be both a one-off hit to asset prices and a long-term reduction in upside potential because the level of future demand will be weaker.

2. Global military spending surges to $2.7 trillion.

More than 100 countries increased their military spending in 2024, with Europe’s military spending surpassing levels last seen at the end of the cold war, driven mainly by the war in Ukraine, while the Middle East’s expenditure reached an estimated $243 billion, a 15 percent increase on 2023, as the Israel-Gaza war and the conflict with Hezbollah in southern Lebanon continue. Asia saw its biggest annual increase since 2009 at 6.3 percent amid heightened tensions, particularly in East Asia.

Source: SIPRI

3. US household equity wealth has dropped by $6 trillion USD year-to-date.

This may lead to further pullback in consumer spending.

Source: BofA

4. America’s drone problem according to Musk.

"...Any country that cannot manufacture its own drones is doomed to be the vassal state of any country that can. And we can't – America cannot currently manufacture its own drones. Let that sink in."

Global drone production is concentrated in China: a single Chinese company, DJI, controls 70% of the global drone market, including the first-person view (FPV) drones used widely by both sides in the war in Ukraine. China makes more drones in a day than the US makes in a year. 

With conventional technology it takes 5 people to operate 1 $30mm dollar drone. With AI, one person can operate 100 drones. Redundant, resilient, if necessary, attritable… working as a team in an autonomous swarm. Asymmetric capability that may call into question the very nature of defense budgets around the world.

Alarmingly, China’s quantitative industrial advantages in drones and ships stand to be amplified by qualitative improvements in battery technologies. Next-generation batteries — like lithium-metal or solid-state — could vastly improve drone range and payload, potentially shifting the military balance of power.

5. Toyota and Waymo team up on autonomous driving tech.

The companies will combine their expertise to develop a new autonomous vehicle platform. Toyota will build the platform, which will be deployed in Waymo's autonomous vehicle fleet, a Waymo spokesperson said. They are also exploring innovations for next-generation personally owned vehicles, according to the joint statement.

That’s some serious competition to Tesla.

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