The week’s market shakeup, inflation that won’t quit, earnings updates, the chance of a government shutdown, and more.
Last weekend, President Trump announced that several European countries would face additional tariffs if they didn’t support the full sale of Greenland to the U.S. Recall that Greenland is an autonomous territory of the Kingdom of Denmark, and its residents are citizens of Denmark. The administration has previously said that military options to acquire Greenland are on the table.
The stated reason for wanting or needing Greenland is national security. However, the U.S. has been scaling back its military presence there since the end of the Cold War and now operates just a single base, the Pituffik Space Base, which houses about 150 troops. The other reason behind the desire for Greenland, not stated in Trump’s Saturday Truth Social post, is to gain access to rare earth and commodity resources. Greenland’s proven reserves of rare earths account for approximately 2% of the global supply.
These comments and Trump’s incendiary address in Davos, Switzerland at the five-day World Economic Forum, rattled financial markets concerned over retaliation and further deterioration of our relationships with our allies. While Trump ultimately pulled what Wall Street has taken to calling a TACO (“Trump Always Chickens Out”) and said he had secured the “framework of a future deal” on Greenland, no one really understands its terms or substance. What is even more puzzling is that the U.S. already has a security agreement with Denmark, made in 1951, that allows for American military presence in Greenland in perpetuity. It’s yet unknown if that is a term in the conceptual deal’s framework.
Trump did clarify that, “I don’t have to use force. I don’t want to use force. I won’t use force”. This cooled building market anxieties about the unthinkable prospect of the U.S. effectively invading a NATO ally for now.
Markets bounced back in relief from this drama but remain uneasy about geopolitics and are on a hair trigger, especially with the U.S. Supreme Court ruling on the legal basis for tariffs still pending. If the Court rules against Trump—as the consensus seems to believe—how will the administration respond?
While geopolitical events are often big news stories and important to us as citizens, please remember that they typically have little long-term import for the trends in markets. Geopolitics matter most if there is an economic or policy impact—think of the oil and inflation shock. Tariffs, of course, have an economic impact, but as 2025 showed, the toll on the stock market was less than initially feared. I would be remiss not to acknowledge that all these geopolitical events are certainly having an impact on prices in the commodities markets, with gold and silver remaining the havens of choice.
Outside of Greenland and Davos, the reaction to earnings reports was muted, except in the case of Intel. The chipmaker saw a sharp drop in price due to its weaker first-quarter guidance (despite investments by Nvidia and the U.S. government), even as it reported better-than-expected earnings and revenue. Intel said in its press release that it is navigating industry-wide supply shortages it expects to bottom out in the first quarter before improving. Next week, many more reports on tech earnings as well as the results from the big credit card companies will be released.
Economic data was also light this week, with the only notable reports the final estimate of U.S. GDP for the third quarter (revised to 4.4% annualized growth) and the November Personal Consumption Expenditure price index (PCE) release that the Federal Reserve refers to in its decision-making. That price index showed an increase in its rate of growth from 2.7% to 2.8% annualized, another signal that inflation just won’t quit.
Finally, no word from Fed officials this week as policymakers sit in their usual period of silence ahead of the next Federal Open Market Committee meeting and rate decision, now less than a week away. Parsing through incomplete and delayed data, the Committee is expected to remain firm on the sidelines with no signal of further rate cuts for the time being.
Unless inflation materially decelerates or the employment picture unexpectedly deteriorates, there is no justification—let alone a sense of urgency—for the Fed to take further action at this point. Even so, U.S. bond yields rose as anxiety built that Trump’s antagonism would spark selling of U.S. government bonds. In addition, it’s worth noting that Japanese government bond yields reached a record high amid unease over that country’s own domestic policy complications, fiscal sustainability and the prospect of a snap election.
Speaking of domestic policy complications and fiscal sustainability, our Congress is in a sprint to pass final appropriation bills to avert a government shutdown on January 30, 2026. At press time, the House had passed the final four appropriations bills needed to fund the government, in addition to the eight already approved. While the final votes rest with the Senate, the measures are expected to pass, preventing the potential crisis of lengthy government shutdown similar to the one in 2025.
Perhaps one lesson from the week for investors to mull is that being pushed to the brink or past it can unite just as often as it divides—think European Union leaders and <gasp> Congress. The other is that 2026 may bring more brinksmanship and TACOs, so let’s brace ourselves and be prepared to work through that dynamic together.
Written by a human.