Global Market Turmoil: Trading Day: Out of Greenland, into the red. The Impact of Trump's Geopolitical Moves. By: Stock Market Charlie

On Tuesday, the financial landscape was buzzing as stocks, bonds, and the dollar took a hit after U.S. President Donald Trump hinted at reigniting a trade spat and stirred the pot with Europe over Greenland. This sent investors scrambling and propelled gold to a dazzling new high!

In my column today, I'm diving into the whirlwind of uncertainty unleashed by Trump that's shaking up global markets. The burning question is: Can investors really gauge such monumental shifts in the global geopolitical arena?

Hand pointing upwards at a glowing arrow overlaid on a stock market chart, symbolizing a rise in financial trends and positive economic growth.

Today's Key Market Movements

STOCKS: A widespread decline across Asia and Europe, with the selloff intensifying during U.S. trading hours - S&P 500, Nasdaq down 2% or more. SECTORS/SHARES: 10 out of 11 sectors in the S&P 500 fell. Technology and consumer discretionary sectors declined by approximately 3%, with only consumer staples showing slight gains. Dell -7%, Hewlett Packard -5%, Netflix -4% following Q4 results. FX: The dollar experienced a broad and steep decline. The USD index had its worst day since August, while the Swiss franc had its best day since September. BONDS: U.S. Treasury yields rose by up to 9 basis points at the long end, steepening the curve. Long-dated Japanese Government Bonds (JGBs) had one of their worst days ever, impacted by snap election concerns. * COMMODITIES/METALS: Oil +1.5%, gold +2% reaching a new high above $4,750/oz. LME copper fell by approximately 2%.

Today's Discussion Points

* The resurgence of 'de-dollarization'

Last year's 'Liberation Day' tariff chaos hinted at the thrilling potential for 'de-dollarization,' as investors reacted to U.S. President Donald Trump's bold economic and geopolitical maneuvers, even towards allies.

The trend took a backseat but could come roaring back as the world responds to Trump's stance on Greenland and Europe. The dollar, Treasuries, and Wall Street all dipped on Tuesday - a combo Washington would rather not see often. Will markets nudge Trump towards de-escalation?

* The impact of JGBs crashing

Tuesday was a landmark day for Japanese government bonds. Prices nosedived amid worries over the snap general election called by Prime Minister Sanae Takaichi for February 8. The long end of the curve took a hit, with the 30-year yield soaring a record 26 basis points.

Japan might be losing its grip on the long end of the curve, as a 'doom loop' of investors selling JGBs and the country's rapidly worsening fiscal situation looms large. Without intervention from the Bank of Japan, buyers are scarce.

* Increasing global risk

The global investment scene at the dawn of 2026 is electrifying. From Venezuela to Greenland, Iran to Japan, political and market dynamics are throwing investors for a loop. Risk is building, and implied volatility is climbing.

Large swings in stocks and currencies are a challenge, but bond market tremors pose even greater risks. Rising borrowing costs suggest that sovereign debt is no longer a safe haven, but rather a signal of inflation and risk premium concerns. This presents a thrilling landscape for both investors and policymakers.

Can global regime change truly be priced?

U.S. President Donald Trump's recent foreign policy and trade war moves are shaking up global markets, but the question remains whether these disruptions will escalate or calm down, as they did last year.

The latter seems more likely, but it's clear that investors are grappling with how to price the seismic shifts in the world's geopolitical dynamics.

The changes that have already unfolded in 2026 are truly astonishing. The Trump administration has ousted Venezuela's leader, claiming to be the de facto ruler of the Latin American nation.

A violent crackdown on protests in Iran has resulted in thousands of deaths, with the threat of a U.S. response still looming.

Additionally, Trump's latest attempt to acquire Greenland from NATO ally Denmark by any means necessary threatens the U.S.-Europe alliance and the rules-based global order established since World War II.

The economic and financial landscape is also fraught with challenges. Trump has issued numerous interventionist decrees on issues ranging from credit card rates to mortgage-backed securities, while pressuring U.S. oil executives to invest billions in Venezuela. Moreover, his Justice Department continues to threaten Federal Reserve Chair Jerome Powell with indictment.

Until now, this "Trumpian assault" on the U.S. and global rules-based order - as described by Matt King, founder of Satori Insights - seemed inconsistent with the relative calm in markets.

That calm is now fracturing. The escalating dispute between Trump and many of America's closest European allies has triggered a widespread selloff in stocks, bonds, and the dollar. Safe-haven gold continues to rise, surpassing $4,700 per ounce.

This appears to mark the return of the so-called 'Sell America' trade. Yet, if last year serves as a guide, these market jitters may prove to be mere speed bumps on the path to new highs rather than significant obstacles.

Do fundamentals still matter?

Setting aside geopolitical drama, consensus expectations for U.S. economic growth and corporate profits suggest that Wall Street is unlikely to remain down for long.

The International Monetary Fund on Monday raised its 2026 U.S. growth estimate to 2.4% from 2.1% in October, partly due to significant investments in artificial intelligence data centers, chips, and power generation.

Furthermore, early indications from the fourth-quarter earnings season are positive. Of the 33 companies in the S&P 500 that have reported so far, 84.8% have exceeded earnings expectations. If the LSEG consensus estimate for year-on-year earnings growth of 9.0% materializes, it should exert upward pressure on equities.

Finally, it's important to remember that high uncertainty isn't necessarily detrimental to growth or profits. In some cases, it could even be beneficial. Consider the investment required to support a global rearmament wave or to secure energy independence and AI autonomy.

No room for indecision

The relative market calm over the past year may partly result from a virtuous cycle - or, viewed another way, an illusion. Passive investment funds continue to channel a steady flow of capital into credit and equity markets, helping to maintain low volatility and high prices. As long as the music continues, investors will keep dancing.

However, the confusing trends of the past year - including concurrent rallies in both risk-on and risk-off assets - also reflect the difficulty of accurately pricing risk on this scale. What value does an investor assign to the dissolution of NATO and the U.S.-Europe alliance, or the emergence of a new multi-polar world divided into three broad "spheres of influence" led by the U.S., China, and Russia?

"For investors, regime change is challenging to navigate. It's like being either at war or not at war. There's no middle ground," says Satori Insights'.

"The risk rally aligns with fundamentals but isn't necessarily driven by them. There's something unusual about it. You can explain it, but there's a degree of vulnerability associated with it."

This applies to corporate earnings as well. There's an assumption that technology and broader earnings will remain at current levels. Threats to the cycle - such as excess AI capacity due to competition from China or regulatory pressure from the EU - don't appear to be factored into analysts' forecasts. But those risks remain.

Perhaps Trump's push for Greenland will be the tipping point for investors, and the current market jitters will evolve into a genuine correction. However, one might be hesitant to bet on it.

What could influence markets tomorrow?

World Economic Forum in Davos, featuring U.S. President Donald Trump, ECB President Christine Lagarde, European Commission President Ursula von der Leyen Indonesia interest rate decision UK inflation (December) Canada producer price inflation (December) U.S. Treasury sells $13 billion of 20-year notes at auction U.S. earnings, including Johnson & Johnson, Charles Schwab, Truist, Halliburton.

Best Regards,

Stock Market Charlie