Markets Bounce On Potential Greenland Deal

Good morning investors,

The tariff playbook delivered again. President Trump's Greenland climbdown Wednesday validated the TACO trade that characterized much of 2025, with all three major indices gaining 1.2% and the Russell 2000 surging 2% to another record close. Those who bought Tuesday's panic are already being rewarded, reinforcing the lesson I've emphasized repeatedly: investors who avoid panic selling on political headlines consistently outperform those who treat every escalation as a regime shift. Markets now turn to substance over theater, with November's PCE inflation reading and a heavy earnings slate providing fundamental anchors after a week dominated by geopolitics.

Futures point to continued strength with Dow ($DIA ( ▲ 0.12% )) futures up 197 points, S&P ($SPY ( ▲ 0.07% )) futures adding 0.6%, and Nasdaq ($QQQ ( ▲ 0.21% )) futures gaining 0.7%. Big Tech names including Nvidia, Meta, and Microsoft are up around 1% in premarket, while Micron advances over 2%. Small caps ($IWM ( ▲ 1.32% )) look set to open at a new all time high.

European markets are rallying with the Stoxx 600 up 1.1% as the continent exhales following Trump's tariff reversal. The EU has frozen its trade deal with the U.S. in response to the initial threats, but the Anti-Coercion Instrument remains a last resort rather than an immediate response.

Intel continues its remarkable run, jumping 11% Wednesday to its highest level since January 2022 ahead of tonight's earnings report. The stock is now up 47% year to date on enthusiasm around new server chips and last year's investments from both the U.S. government and Nvidia.

Trump's Truth Social post announcing a "framework of a future deal" with NATO Secretary General Mark Rutte provided the de-escalation markets needed. Making plans to make a plan isn't actually a deal, but it was enough to push the S&P 500 back toward 6,900 and validate the dip-buying strategy.

The pattern echoes last April's Liberation Day scare perfectly. Tariff announcements briefly sent stocks lower before they staged one of the sharpest relief rallies in history. Whether you agree with the president's policy decisions or not, the market's conclusion is clear: headline noise does not create lasting damage for asset prices.

Trump looks to the stock market as a scoreboard for his administration. How low would he really allow prices to fall? In comments Wednesday, he called the recent dip "peanuts" and predicted the Dow would hit 50,000, doubling "in a relatively short period of time."

I spoke to this yesterday regarding the VIX spike playbook. Dating back to 1990, 30% weekly VIX surges have coincided with median S&P 500 returns of 17% over the following twelve months. The pattern held again.

November's PCE price index arrives this morning with economists expecting core PCE at 2.8% year over year, still elevated from the Fed's 2% target. Personal income is expected up 0.4% with personal spending rising 0.5%. We also get final Q3 GDP (expected 4.3%) and weekly jobless claims.

The Fed's preferred inflation gauge will inform expectations for the policy path ahead. Core PCE holding at 2.8% would suggest the central bank maintains its cautious stance, though the healthy consumer spending data points to economic resilience that supports risk assets.

At Davos, Nvidia CEO Jensen Huang told BlackRock's Larry Fink that "trillions of dollars of AI infrastructure need to be built," once again reinforcing the bullish message that has sent his company to the highest valuation ever. Nvidia rose over 3% as other AI related names rallied in tandem.

Huang explained that the fruits of investment will ripen on top of a universal data center foundation. "This layer on top ultimately is where economic benefit will happen," he said, noting it "could be in financial services, it could be in healthcare, it could be in manufacturing."

Both Huang's comments and Trump's Greenland resolution made quite the week for dip buying investors. As one observer put it, they "made the loyal buy the dip market goers happy from hundreds of miles away."

GE Aerospace forecast 2026 adjusted profit of $7.10 to $7.40 per share, above the $7.11 analyst consensus, driven by strong demand for high-margin aftermarket parts and services. Airlines are prioritizing maintenance spending due to aircraft supply constraints, benefiting the company's services business.

Fourth quarter adjusted profit came in at $1.57 per share versus $1.32 a year earlier, with adjusted revenue rising 20% to $11.87 billion. The company expects 2026 adjusted revenue to increase in the low-double-digit percentage range.

The results highlight how aerospace exposure continues rewarding investors as the industry works through supply chain constraints while demand remains robust.

The Supreme Court heard oral arguments on Trump's attempt to fire Fed Governor Lisa Cook over fraud allegations she denies. None of the justices expressed agreement with the administration's arguments, appearing more sympathetic to Cook's position through several skeptical lines of questioning.

The case matters because it could chip away at Fed independence from political interference if the court sides with Trump. For now, the justices' apparent reluctance to quickly decide in the president's favor provides some comfort to markets worried about central bank autonomy.

Alibaba is preparing to list its chipmaking arm T-Head, tapping strong investor interest in companies aspiring to compete with Nvidia in AI accelerators. The company plans to restructure the unit as a business partly owned by employees before exploring an IPO. ADRs rose more than 5% in premarket trading.

Honeywell settled its litigation with Flexjet, taking a $470 million charge in exchange for extending its aircraft engine maintenance deal through 2035.

Kinder Morgan beat Q4 expectations with adjusted profit of $0.39 versus $0.37 expected, remaining bullish on long-term U.S. natural gas demand from data center electricity consumption. The company transported 48.4 trillion BTU per day, up from 44.5 trillion a year earlier.

Memory chip prices are surging as AI infrastructure buildout absorbs supply, pushing companies from HP to Raspberry Pi to raise sticker prices on consumer electronics. Samsung, SK Hynix, and Micron are struggling to keep up with data center demand while consumer device markets face headwinds.

United Airlines CEO Scott Kirby escalated the battle with American at Chicago O'Hare, pledging to add "as many flights as are required" to defend United's position. Kirby noted United earned about $500 million in Chicago in 2025 while American lost a similar amount.

Despite beating estimates and disclosing 325 million subscribers, Netflix shares fell Wednesday as growth deceleration and WBD acquisition costs weighed on sentiment. The stock is down more than 30% over the past six months.

The results illustrate why Netflix needs Warner Bros. Growth is slowing, and the company must continue spending big on new entertainment for a record subscriber base. Co-CEO Ted Sarandos noted WBD has "three core businesses that we don't currently have." Netflix doesn't need Warner Bros. right now, but these results show why it, and almost every other entertainment company, will eventually need more firepower.

Wednesday's rally wasn't just a relief bounce, it was a broadening story. The Russell 2000's 2% gain to a record close, alongside significant gains in financials and energy, demonstrates exactly what a healthy market looks like.

A broadening rally is a hallmark of a healthy market. Earnings estimates continue rising not just among the Magnificent Seven, but across sectors such as financials and industrials. This directly contradicts bubble dynamics where leadership narrows into the final stages.

Politics have forced their way into the market narrative with such frequency that news-driven volatility is beginning to eclipse fiscal and trade policy. On many trading days, it feels like politics is the primary driver of price action. But the underlying fundamentals, the earnings growth, the rotation into cyclicals, the small cap strength, all point to a market with solid footing beneath the headline noise.

This week provided a masterclass in why process matters more than prediction. Tuesday's 2.1% decline looked ominous in the moment. Wednesday's 1.2% recovery looked inevitable in hindsight. The difference between panic and profit came down to discipline.

The Greenland fiasco echoes Liberation Day perfectly. Maximum pressure, market selloff, then resolution and relief rally. Investors who stayed invested after last April's tariff announcement are up roughly twice as much as those who sold in the panic. The same dynamic played out this week on a compressed timeline.

Trump's statement that markets would double and hit Dow 50,000 captures his view of the stock market as a scoreboard. Whether you find that reassuring or concerning, the practical implication is clear: this administration has limited tolerance for sustained market declines.

The fundamental picture supports continued optimism. Q4 earnings are tracking toward 14% growth when positive surprises are factored in. The rotation from mega cap tech to broader market participation has years to run. Tax refund stimulus arrives in the first half. Small caps keep hitting records while trading at substantial valuation discounts to large caps.

While I expect more volatility as we work through spring, the case for a continued bull market remains strong. Use political headlines as opportunities rather than exit signals. The tariff playbook works until it doesn't, and so far it keeps working.

PCE data this morning will refocus attention on fundamentals. Watch core inflation at 2.8% for confirmation the Fed stays patient. Intel's report tonight provides another read on AI infrastructure demand. The earnings calendar remains the true market driver regardless of what Truth Social delivers.

As always, feel free to reach out with questions about positioning.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.