U.S. President Donald Trump\u2019s latest foreign policy and trade war salvos \u200bare upsetting global markets, but the question is whether these ructions will escalate or \u200dfade away, as was the case during the last 12 months.<\/p>\n
The latter is probably more likely, but either way, it is apparent that investors are struggling to adequately price the fundamental shifts in the world\u2019s geopolitical tectonic plates.<\/p>\n
And the shifts that have already taken place in 2026 are truly breathtaking. The Trump administration has removed the leader of \u200dVenezuela, and \u200bnow appears to be the Latin American country\u2019s de facto ruler.<\/p>\n
A violent crackdown on protests in Iran has killed thousands, with the threat of a U.S. response still lingering.<\/p>\n
And then there is Trump\u2019s latest push to acquire Greenland from fellow NATO ally Denmark by any means necessary. The U.S.-Europe alliance, and indeed the very rules-based global order built since World War Two appears to be in jeopardy.<\/p>\n
The economic and financial terrain is a minefield too. Trump has issued a host of interventionist decrees on issues from credit card rates to mortgage-backed securities, while \u2060also pressuring U.S. oil executives to invest billions in Venezuela. And lest we forget, his Justice Department is still threatening to indict Federal Reserve Chair Jerome Powell.<\/p>\n
Until now, though, this \u201cTrumpian assault\u201d on the U.S. and global rules-based order \u2013 to borrow a phrase from Matt King, founder of Satori Insights \u2013 seemed at odds with the relative calm across markets.<\/p>\n
That calm is fracturing. The escalating spat between Trump and many of America\u2019s closest European allies has triggered a widespread selloff in stocks, bonds and the dollar. Safe-haven gold has continued to climb, busting through US$4,700 per ounce.<\/p>\n
This \u200clooks like a return of the so-called \u2018Sell America\u2019 trade. \u200dYet if last year is any guide, these market jitters may turn out to be speed bumps on the way to new highs rather than roadblocks.<\/p>\n
Putting the geopolitical drama aside, consensus expectations for U.S. economic growth and corporate \u200cprofits suggest that Wall Street is unlikely to stay down for long.<\/p>\n
The International Monetary Fund on Monday raised its 2026 U.S. growth estimate \u2060to 2.4 per cent from 2.1 per cent in October, due in part to the huge sums being plowed into artificial-intelligence data centers, chips and power generation.<\/p>\n
Moreover, early indications from the fourth quarter earnings season are encouraging. Of \u200bthe 33 companies in the S&P 500 that have reported so far, 84.8 per cent have notched an earnings beat. If the LSEG consensus estimate for year-on-year earnings growth of 9.0 per cent materializes, that should put upward pressure on equities.<\/p>\n
Finally, it\u2019s good to remember that high uncertainty isn\u2019t necessarily bad for growth or profits. In some cases, it could even be positive. Think of the investment needed to fund a global rearmament wave, or to fuel the scramble for energy security and AI independence.<\/p>\n
Markets\u2019 relative calm over the past year \u200bmay partly be the result of a virtuous cycle \u2013 or, looked at another way, an illusion. Passive investment funds continue to send a steady flow of capital into credit and equity markets, helping to keep volatility low and prices high. As long as the music is playing, investors will keep dancing.<\/p>\n
But the confusing trends of the last year \u2013 including simultaneous rallies in both risk-on and risk-off assets \u2013 also reflect the fact that it is simply very difficult to accurately price risk of this scale. What value does an investor assign to the end of NATO and the U.S.-Europe alliance, or the emergence of a new multi-polar world carved into three broad \u201cspheres of influence\u201d headed by the U.S., China and Russia?<\/p>\n
\u201cFor investors, regime \u2060change is hard to navigate. It\u2019s like you are either at war or you aren\u2019t at war. There\u2019s no limbo,\u201d says Satori Insights\u2019 Matt King.<\/p>\n
\u201cThe risk rally \u2060is consistent with fundamentals, but not necessarily driven by fundamentals. There\u2019s something very odd about it. You can explain it, but there is a degree of vulnerability about it.\u201d<\/p>\n
This applies to corporate earnings too. There\u2019s an assumption \u200cthat tech and broader earnings will remain at current levels. Threats to the cycle \u2013 such as excess AI capacity due to competition from China or regulatory pressure from the EU \u2013 don\u2019t appear to be captured in analysts\u2019 forecasts. But those risks still exist.<\/p>\n
Perhaps Trump\u2019s push for Greenland will be the straw that breaks investors\u2019 backs, and the current market jitters will turn into a true correction. You might not want to bet on it though.<\/p>\n","protected":false},"excerpt":{"rendered":"U.S. President Donald Trump\u2019s latest foreign policy and trade war salvos \u200bare upsetting global markets, but the question…\n","protected":false},"author":2,"featured_media":421638,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[901,888,902,879,877,903,45,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":{"0":"post-421637","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-alberta","9":"tag-arts-news","10":"tag-bc","11":"tag-breaking-news","12":"tag-breaking-news-video","13":"tag-british-columbia","14":"tag-business","15":"tag-ca","16":"tag-canada","17":"tag-canada-news","18":"tag-canada-sports","19":"tag-canada-sports-news","20":"tag-canada-trafficcanada-weather","21":"tag-canadian-breaking-news","22":"tag-canadian-news","23":"tag-economy","24":"tag-education","25":"tag-environment","26":"tag-federal-government","27":"tag-foreign-news","28":"tag-globe-and-mail","29":"tag-globe-and-mail-breaking-news","30":"tag-globe-and-mail-canada-news","31":"tag-government","32":"tag-life-news","33":"tag-lifestyle","34":"tag-local-news","35":"tag-manitoba","36":"tag-national-news","37":"tag-new-brunswick","38":"tag-newfoundland-and-labrador","39":"tag-northwest-territories","40":"tag-nova-scotia","41":"tag-nunavut","42":"tag-ontario","43":"tag-pei","44":"tag-photos","45":"tag-political-news","46":"tag-political-opinion","47":"tag-politics","48":"tag-politics-news","49":"tag-quebec","50":"tag-sports-news","51":"tag-technology","52":"tag-travel","53":"tag-trudeau","54":"tag-us-news","55":"tag-world-news","56":"tag-yukon"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/421637","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=421637"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/421637\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/421638"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=421637"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=421637"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=421637"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}