Trump chaos couldn’t mask market fundamentals
The week revolved almost entirely around President Trump. Rhetoric softened meaningfully on Greenland; after meeting with NATO secretary general, Mark Rutte, Trump said a framework for a future deal had been established and that tariffs scheduled for February 1 would not go ahead. Markets immediately recognized the TACO pattern (Trump always chickens out). Risk assets rallied hard on this de-escalation, only to wobble again when Denmark rejected negotiations on a takeover. That weakness did not last. Trump followed up by explicitly ruling out Greenland-linked tariffs, sending stocks back to the highs of the day. This episode felt uncomfortably familiar. We have seen this movie before; by now, we should know how it ends.
Stocks, bonds, gold, crypto, crude and the dollar all finished higher. Small-capitalization companies (those with a relatively low market value) led the way, erasing their Greenland-related losses and extending their relative outperformance versus the S&P 500 Index. Japan’s bond market calmed, helping long-end yields fall, which added fuel to the risk rally. The defining feature of the session was not conviction, it was liquidity. With ETFs dominating volumes, markets lurched from headline to headline. When Trump eased on his rhetoric, buying became frantic. Fundamentals in this market are still great after all.
The labour market remained tight in the U.S., with weekly jobless claims staying flat at 200,000. On a non-seasonally adjusted basis, claims rose (as they usually do this time of year), but this level remains near the lowest seen since the late 1960s. Continuing claims also fell to their lowest level since November. This continues to align with what markets have been slowly accepting; the labour market is not cracking, and rate cuts are not imminent. That reality explains the ongoing pushback in rate-cut expectations, even as equities rally on relief trades (where banks transfer risks from loans to investors).
Looking ahead, Trump-driven volatility appears to be behind us for now (which in itself is a fragile statement). But one conclusion feels increasingly obvious: panic selling because of Trump’s threats has been a losing strategy. Markets have learned to wait for the reversal. Until that changes, headlines will keep moving prices intraday, but fundamentals will still decide where they settle.
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