US stocks extended gains after President Donald Trump retreated from tariff threats tied to the Greenland dispute, easing fears of a deeper US-Europe clash. Sentiment improved after NATO’s secretary general described a breakthrough that centered on Arctic security rather than sovereignty, which helped calm markets that had reacted to escalating rhetoric earlier in the week.
Still, strategists cautioned that headline-driven trading can reverse quickly, even when fundamentals remain supportive. Bespoke Investment Group said the past few days showed why investing in front-page headlines tends to backfire, while market watchers noted that the rapid pivot in sentiment revived talk of a short-lived ‘TACO trade.’
JPMorgan Chase & Co. strategists said they saw little evidence of foreign investors pulling back from US equities or bonds despite the geopolitical flare-up. However, discussion on trading floors included the risk of symbolic actions from Europe, including potential asset sales, even if the flow data has not shown a broad shift.
Trump added pressure by warning of “big retaliation” if European countries sell US assets, while asserting that the US has “all the cards.” Meanwhile, Greenland’s pension fund, SISA Pension, said its board and investment committee have debated whether to continue investing in US stocks as a symbolic stand, though no decision has been made.