If there has been one consistent message in our analysis over the past few years, it is that global portfolios have crowded—to an unhealthy degree—into a single bet: the US technology sector, and by extension the US dollar. Yesterday offered a small but telling illustration showing why that should trouble investors. Shares linked to artificial intelligence sold off. The yen and the Swiss franc rallied. And yet the dollar tumbled. That is not how a reserve currency is supposed to behave on a risk-off day. It is how a risk-sensitive currency behaves.

A long period of US exceptionalism set the stage. A handful of American firms have grown so spectacularly, for so long, that they now dominate global benchmarks. Public pension plans in Ontario, life insurers in Tokyo, reinsurers in Frankfurt and sovereign-wealth funds in Abu Dhabi have, through proactive allocation decisions and passive valuation gains alike, found themselves running the same playbook. The US alone now accounts for roughly half of global stock market value, up from a third less than 15 years ago, and a few technology giants are responsible for an unprecedented share of the total.

In currency markets, this matters more than it might appear. An institution that buys an S&P 500 tracker is not merely long American earnings; it is long the dollar, whether or not its investment committee ever discussed the currency. Most of that exposure is unhedged. Add up enough passive dollar longs and you have a structural bid for the greenback that has little to do with trade, interest rates or the traditional story of central-bank reserve accumulation.

We think this structural bid explains why the dollar has stayed strong through conditions that, on a balance-of-payments basis, ought to have weakened it. The US runs a persistent current-account deficit; wide trade gaps and vast fiscal shortfalls have pushed its net international investment position towards negative $22trn. For most countries, this would mean a slowing in growth due to higher yields, a cheaper currency—or both—but America has escaped that fate because the rest of the world keeps turning up to buy its equities—and keeps doing so without hedging.

The dollar’s role, in other words, has changed. For decades it was a “reserve currency” in the strict sense: central banks and foreign institutions held it to match their liabilities, and it rose when risk appetite fell, because the world’s safe asset is where capital flees in a panic. Increasingly it resembles what Adam Tooze, the historian, calls a “profit currency”: one that investors own because the best-performing assets happen to be denominated in it. A profit currency does not rally in a panic. It sells off alongside the assets that justified holding it. Yesterday’s pattern—dollar down, yen and franc up, as technology shares plunged—fits this framework. And it has been showing up more often.

None of this means that some sort of “doom loop” has gotten underway. American capital markets remain the envy of the world. Technology shares are still trading at nosebleed valuations. The Treasury can fund itself on attractive terms. And the dollar has read its own obituary often enough to instill humility in those of us who have watched currency developments for a long time.

But corporate hedgers and investors should consider the dynamics that could unfold if the AI boom loses steam, or if a critical mass of foreign investors decide to raise their hedge ratios and tilt back toward home markets. A self-reinforcing cycle could take hold, with technology stocks falling, unhedged dollar positions losing value, foreign holders selling to reduce their exposure, and the dollar weakening further as each stage amplifies the next.

Many things moved markets yesterday, and one bad day proves nothing. But the direction of travel was exactly what you would expect when someone shouts “fire” in a crowded theatre. When the world’s biggest trade flinches, it is worth verifying where the exits are.