Geopolitical and tariff risk back for markets

As US President Donald Trump kicks off the second year of his second term in office, the geopoliticaland tariff-related volatility that characterized his return to power has resurfaced to shake markets.

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Traders work on the floor of the New York Stock Exchange. Three straight years of double-digit returns have pushed market valuations to lofty heights, analysts say.

Investors who have been conditioned to asset prices swiftly rebounding are worried that this time, there could be more lasting damage.

Volatility measures across asset classes rose while stocks, US long-dated Treasuries, and the US dollar sold off on Tuesday, a day after Trump threatened to rekindle a trade war with Europe over the US administration’s aim to take over Greenland, threatening to blow apart the political and military alliance that has underpinned Western security for decades. The threats have revived talk of the Sell America trade that emerged following last year’s “Liberation Day” tariff announcement in April, with investors shying away from US assets.

“Global investors are taking these threats seriously,” Jack Ablin, founding partner and chief investment strategist at Cresset Capital.

“I would have thought after Liberation Day that a lot of investors would fade the selloff and try to pick a bottom, but that doesn’t appear to be happening this time around,” he said.

For Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, the market action was reminiscent of last year.

“(The) market peaked in late January, early February. Then as the tariff news hit the headlines, the market had a pretty good correction,” Tuz said.