A rift between the United States and Europe over the future of Greenland sent the S&P 500 index lower this week, while the broader market ended just before the shortened holiday period began. President Donald Trump stepped up efforts to annex Denmark over the weekend, threatening to impose new tariffs on imports from eight European countries that oppose the move. The tariffs targeted long-time allies Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland, and were scheduled to take effect from 10% on February 1st. Traders returning from the Martin Luther King Jr. vacation found the market depressed. On Tuesday, the benchmark S&P 500 fell about 2%, as did the Nasdaq Composite Index. The Dow Jones Industrial Average fell 870 points. That all changed on Wednesday when the president announced that he had worked with NATO Secretary-General Mark Rutte to “shape the framework for a future agreement on Greenland” and scrap the threatened tariffs. In response, U.S. stocks soared on Wednesday and continued to rise on Thursday, leaving the S&P 500 only a few minutes lower this week. .SPX Mountain 2026-01-20 S&P 500 since January 20 “The big question last week was, ‘Why didn’t the market really react to a lot of these issues until they did this week?'” asked Tom Garretson, senior portfolio strategist at RBC Wealth Management, in an interview with CNBC. “The threat of tariffs will be there, but at the end of the day, the administration is broadly aware of the negative impact on the market. I think the market is kind of relying on the idea that if you push things like tariff threats too far, they’ll start to back off,” said Jed Ellerbrook of Argent Capital Management.In other words, the market no longer believes all of President Trump’s proclamations will be fulfilled. If investors had believed that, the market would have posted a much larger loss than the 2% seen on Tuesday, he added. “It’s very difficult for the stock market to price in President Trump and his actions and actions,” Ellerbrook reiterated. “Some volatility is to be expected.” Even if investors recycle last spring’s TACO trade to mean “Trump always chickens out,” there is still a threat that geopolitical unrest, especially trade-related unrest, could disrupt markets. For example, on Thursday, Greenland’s Prime Minister Jens Frederik Nielsen said that although he did not know the contents of the “framework” agreement that President Trump reached with Mr. Rutte, Greenland’s sovereignty was non-negotiable, echoing earlier statements made by Danish Prime Minister Mette Frederiksen. “With valuations as they are, there’s less and less cushioning room. I think we saw a little bit of that indigestion in the market earlier this week, and we’ll see more of that throughout the year as volatility and headlines increase,” said Scott Ellis, managing director of corporate credit at Penn Mutual Asset Management. “We expect some volatility.” Still, Ellis remains positive about the outlook for stocks in 2026, believing diversification will be key to weathering future storms. Eric Parnell, chief market strategist at Great Valley Advisor Group, said the market’s underlying fundamentals remain “strong” and investors should keep a close eye on macroeconomic data. He said volatility could “create buying opportunities.” “It’s shocking news in the short term for the market to say, ‘Okay, we’re talking about annexing Greenland. We’re going to put tariffs on these countries.’ It spooked the market on Tuesday, but as soon as the market reacted to that, it was debunked by the White House and the market rallied,” he said. Against this backdrop, Parnell said, “Last year was a great year for international and emerging markets. We remain positive in markets outside the United States.”
