Geostrategic Media Political Commentary, Analysis, Security, Defense
As President Donald Trump begins the second year of his second term, there is renewed volatility in the markets linked to geopolitical tensions and trade issues. Investors are concerned that this time the repercussions could be more severe and long-lasting compared to previous events. On Tuesday, volatility across various asset classes increased, with stocks, U. S. long-dated Treasuries, and the dollar declining sharply after Trump threatened to reignite a trade war with Europe over the U. S. interest in Greenland, which could jeopardize long-standing political and military alliances.
Such threats have led investors to recall the “Sell America” trade associated with last year’s tariff announcements. Jack Ablin, chief investment strategist at Cresset Capital, noted that global investors are taking these threats seriously, and unlike last year’s market rebound, many are hesitant to invest this time. Peter Tuz from Chase Investment Counsel echoed that current market behavior is similar to the turbulence experienced last year, expressing hope that it won’t be as dramatic. Concerns grow as multiple asset types are experiencing sell-offs simultaneously, indicating a broader market worry. Lauren Goodwin from New York Life Investments highlighted that a day of declines across bonds, equities, and the dollar forces people to reevaluate their market assumptions.
Despite Trump ruling out the use of military force regarding Greenland, anxiety remained high, particularly after the S&P 500 recorded a significant drop of 2.1%, its largest in over three months, with few buyers stepping up to purchase the dips. Market valuations are high after three consecutive years of strong returns, raising concerns about their vulnerability to negative news. Matthew Miskin from Manulife John Hancock Investments suggested considering protective strategies amid the potential for new geopolitical events.
Nevertheless, some investors, like Michael Rosen from Angeles Investments, remain confident in U. S. stocks, citing strong corporate profitability, while others warn that if foreign investors pull back from U. S. assets, market returns might suffer. Anne Walsh of Guggenheim Partners emphasized potential dampening effects if foreign money stops flowing into the U. S.
As companies prepare to report fourth-quarter earnings, expectations remain positive, predicting continued earnings growth in the coming years. Investors are mostly remaining patient, recognizing that should the situation escalate further, it could pose serious challenges. There is speculation that Trump may eventually negotiate more moderately, leading to caution among traders about committing to aggressive sell-offs. The term “TACO,” referring to Trump’s tendency to back off threats, reflects a collective sentiment of uncertainty and strategic wait-and-see among investors.
