'Sell America' Trade Gains Traction as Political Risk Diverts Flows North

TORONTO/NEW YORK – A noticeable shift in North American capital flows is underway, with the Canadian Dollar (CAD) and Toronto Stock Exchange (TSX) emerging as unlikely beneficiaries of Washingtons political turmoil.

Strategists are calling it the “Sell America” trade. As the US administration clashes with the Federal Reserve and issues unpredictable directives regarding corporate dividends and credit card rates, institutional money is seeking stability in neighboring jurisdictions.

The Canadian Hedge

Canadas S&P/TSX Composite Index recently posted its best performance relative to the S&P 500 in two decades, a trend extending deep into January 2026.

• Valuation Gap: The USD/CAD pair faces selling pressure near the 1.3900 fib level, as traders bet that the divergence in political stability will favor the Loonie.
• Bank of Canada: While the Canadian economy has its own challenges, the relative predictability of the Bank of Canada compared to the currently besieged Federal Reserve is attracting foreign portfolio investment.

“Global investors are beginning to demand a risk premium for holding US assets,” warned Seth Meyer of Janus Henderson Investors. If the perception of US institutional erosion continues, the rotation out of USD-denominated assets and into “stable” commodities and neighboring economies could accelerate in Q1.

Technicals

• Resistance: USD/CAD shows selling pressure at the 1.3900 fib level.