Brothers in arms

Welcome to the anniversary of Trump’s ascent.

To mark the occasion, US bond prices tanked and yields spiked. Gold raced past $4,700 an ounce as the US$ fell again. Bullion up a blistering 3%. Silver bolting higher. The Dow opened down 700 points. The S&P 500 gave up a hefty 1.5% of its value at the bell.

Over the long weekend (it was MLK Day yesterday) the US president upended things yet again. As Euro leaders and NATO allies lined up to say ‘hands off Greenland’, Trump said he’d punish them with a new 10% tariff next month rising to 25% later, and maybe a 200% tariff on French wines just ‘cuz Macron is too cool and rebellious. (Did you see the blue shades?)

Then the guy posted this on his Social Media site…

Yeah, that’s Greenland with a US flag on it. Plus another on Argentina. And us – we’re stars-and-strips, too. It’s an AI rendition of a photo of 47 with key European leaders in the oval – fake in execution, but not intent. The American president just published it, after all.

As you know, Denmark owns Greenland and is a founding member of NATO. That alliance has been more relevant than ever since Russia decided to attack Ukraine in the worst war since WW2. A founding principle of NATO (Article 5) is that an attack on one member is an attack on all. (You whack my brother, I’m gonna rip your head off…). So forced American annexation of Greenland has created a crisis. Now Trump has exacerbated it. Mr. Market ain’t happy.

Why did financial markets start today badly?

Because Trump’s imperial, expansionary, aggressive, colonizing actions were unexpected while  investors thought they could ignore tariffs. But suddenly the specter of a global trade war reappeared – just when the market had raced through giddy new record highs, with lofty P/E ratios, low cash holdings and the whiff of another winning year in its nostrils.

Now Trump is off to the WEF chinwag in Davos tomorrow (Carney is already there) to lecture global leaders on why the United States should take over a huge chunk of a sovereign nation. He has already declared himself on social media as the “Acting President of Venezuela” and, of course, said flatly that Canada should be the 51st US state. Mr. Market could slough all that off as Trumpian excess and BS, but sweeping tariffs on eight western industrialized nations is too much to swallow.

Moreover, it’s extortion. Allies are being asked to choose between mutual defence and group destruction. Give me Greenland, he says, or your economies will be hurt bad. Guts everywhere. And wine.

Well, we don’t know where this goes. Trump could be bluffing, posturing and hoping to merely buy that island for a trillion or two. Maybe he’ll actually send an aircraft carrier. Perhaps he’ll TACO and back down in the face of market resistance. As for Canada, he can pound salt – as much as the Americans are hopeful that our Wexit traitors will cleave the Dominion. (They won’t.)

But markets did not expect this, and reacted as they always do when surprised. Risk off. Sell. It’s especially noteworthy after 2025 delivered a massive win for investors. Just look at the 32% total return on Bay Street.

Returns on Euro markets are suddenly in question. Global trade patterns could be disrupted again if major industrial economies are tariffed over Greenland. Meanwhile new waves of import taxes would raise consumer prices for Americans, where inflation is still running hot and the president is in a fight with the central bank.

The last time something akin to this happened was in April. Liberation Day brought insane tariffs that Trump had to back away from – but not before equities tumbled to near bear-market levels. Since then, AI euphoria and subdued trade actions allowed stocks to climb into unchartered territory. Investors papered over craziness like ICE, Maduro, the ballroom, boat bombings, Iran and retribution prosecutions with avarice and capital gains.

Now what?

Unknown. But after you have survived a few crises, you learn. They pass. Always.

Hopefully 2025 did not entice you to overweight stocks in your TFSA or retirement plan, to eschew a cash holding or not stay diversified in a few REITs, bonds or preferreds. Don’t let the current trade threats make you sell off international equities. Don’t allow the goon brownshirts of ICE in Minneapolis to sour you on American assets. And Canada looks better by the week as we build out the place and find stable new customers – even if they’re Commies.

As they used to say, better Red than dead. Or was that the other way around?

About the picture: It snowed insanely in the last few days. In fact, Cody was chest-high in it by the weekend. Joy to a four-year old Chow is finding a snowdrift, in a snowstorm, then refusing to move while a human or two freeze to death in near proximity. Does your pooch do the same, or wimp out?

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2026/01/20/brothers-in-arms/