Hi YXI friends,

As world leaders head to Davos, Trump’s recent pressure to “buy” Greenland with tariff threats has put markets on high alert. (Note that this is not a political newsletter, so I am not going to comment on the political side of this move.)

Specifically, the US plans to apply a 10% tariff "on any and all goods" from Denmark, Norway, Sweden, the UK, France, Germany, the Netherlands, and Finland, effective February 1st. Tariffs will increase to 25% from June 1st until a deal is reached for Washington to purchase Greenland from Denmark.

Before the Supreme Court rules on the Constitutional validity of Trump’s global tariffs, the market will look back to the early 2025 playbook on 1) whether Trump will follow through with his threats, and 2) the potential fallout should he do so, including but not exclusively on the inflation impact.

Interestingly, while Trump slapped tariffs on Canada, Mexico, and China on February 1st, the S&P 500 actually made a new high on February 19.

Will the market try again not to panic and assess in the next two weeks? Currently, ES and NQ futures are down 1.5%, while the 10Y and 30Y yields are up 5-7bp. Crypto took a mini-dive over the long weekend, while gold and silver reached new all-time highs.

Together, the macro price action suggests “Risk Off” to start the week, although not quite descended into real panic.

We know that in the recent week, liquidity and risk appetite have returned to the market. My suspicion is that the market will still at least try to shrug off the tariff concerns this week, i.e. attempt to climb the wall of worry. However, we will be closely watching how the macro relationships evolve in case we do need to jump off the ship (early).

DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

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