Wall Street closed the trading week lower following a volatile stretch marked by heightened geopolitical uncertainty. Geopolitical developments took center stage after Donald Trump reiterated his interest in Greenland during remarks at the World Economic Forum in Davos, Switzerland. By the end of the week, Trump had backed off annexing Greenland, reversed the tariffs on Europe and instead, imposed 100% tariffs on Canada as it sought to strike a trade deal with China. Just another week of chaos from the White House.
Meanwhile, gold extended its rally, moving closer to the $5,000 an ounce level as investors sought refuge amid rising geopolitical tensions and renewed concerns over the Federal Reserve’s independence. On the earnings front, shares of Intel plunged just over 17% on Friday following the company’s latest earnings release while Netflix drifted lower as continued uncertainty around its acquisition of Warner Brothers weighed on the stock.
For the week, the S&P lost 0.4%, while the Nasdaq dipped 0.1%, and the Dow fell 0.5%.
Future Wealth’s View
At his much awaited speech at Davos this week, Trump lashed out at Europe and the rest of the world citing his penchant for tariffs and controlling Greenland. That prompted a wave of speeches by other countries signaling the rupture of the US-Europe alliance. Mark Carney, Prime Minister of Canada stated “The middle powers must act together because if we’re not at the table, we’re on the menu.”
It is clear to us, at Future Wealth LLC, that Canada and countries in Europe are going to methodically reduce their reliance on the US and instead, pursue trade deals with China and India. Trump’s tariff play is getting tiring and countries no longer want to acquiesce and “bend the knee” to his demands. As we have stated in our reports for the past two weeks, we believe that Trump and his policies remain the biggest threat to the stock market this year.
As a counter measure, we recommend investors begin to increase their exposure into international and emerging markets. Non-US companies could all begin to see more investments flooding into their coffers as countries reduce their investments in the US companies.
It could be an ugly year on the geopolitical front.