Trump crash markets
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One of the few things capable of constraining Trump in his second term is the performance of the markets, which matter to Trump’s vanity and to the scorekeeping of his plutocrat friends. The response to the threats to seize Greenland on the eve of Davos has been has been hostile:
Stocks fell sharply on Tuesday, after President Trump’s insistence that the U.S. take control of Greenland reignited fears of a global trade war.
The Dow industrials lost 871 points, or 1.8%, the dollar weakened and Treasury yields rose, with the 10-year touching its highest level since August. Investors sought safety in traditional havens, pushing gold prices to a fresh record. The Swiss franc rallied.
The declines gained momentum after President Trump doubled down on his desire to take over Greenland, firing off social-media posts on his way to the World Economic Forum in Switzerland. He is expected to spar with leaders there about his territorial ambitions and his threats to torpedo the U.S.-European trade relationship if he doesn’t get what he wants.
Asked how far he is willing to go to acquire Greenland, Trump told reporters at the White House, “You’ll find out.” He also expressed further confidence that he could reach a deal on acquiring the semiautonomous Danish territory.
Among U.S. benchmarks, the Nasdaq composite dropped 2.4% and the S&P 500 lost 2.1%. Big technology names such as Nvidia, Alphabet and Amazon skidded, with all of the so-called Magnificent Seven growth stocks down at least 1.1%.
Elsewhere, Japan’s long-term government bond yields leapt to record highs, on concern that a coming election could lead to a tax cut that dents the country’s finances. Global bond yields rose.
The dollar retreated against the yen, euro and Swiss franc. Silver futures rallied to a new record above $94 a troy ounce and gold topped $4,750, hitting its own record.
There’s no guarantee that this will continue — the markets might come back to the view that AI trumps anything else going on again — but if it does it is probably the best chance of avoiding catastrophe. We certainly know Congress won’t do anything.