Wall Street Sees Buying Opportunity in Trump-Stoked Chaos
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January 21, 2026 at 5:30 AM EST
Takeaways by Bloomberg AIHide
- The US is threatening an economic war to gain control of Greenland, and Japan’s political uncertainty has affected global bond markets, but Wall Street strategists say the foundation for more gains looks solid.
- Risk assets have long looked past prior bouts of geopolitical unrest, except when the disorder causes oil prices to spike, and corporate profits are projected to grow by roughly 9% in the fourth quarter.
- Despite sentiment being optimistic to the point of being worrisome, forecasters expect the US economy to be lifted by tax cuts and real wage gains, and many strategists maintain a risk-friendly stance, at least until the earnings season is complete.
The US is threatening an economic war, at minimum, to gain control of Greenland. Japan’s political uncertainty has roiled global bond markets. And the Federal Reserve’s independence remains under threat from the Trump administration.
That’s not exactly a setup that screams buy risk assets, especially with bulls handily outnumbering bears and US stocks trading at lofty valuations. Equities sank the most since October Tuesday, but for all the turmoil rattling markets, the foundation for more gains looks solid, Wall Street strategists say.
Their reasoning generally rests on the idea that risk assets have long looked past prior bouts of geopolitical unrest, except when the disorder causes oil prices to spike. While crude climbed Tuesday, both Brent and West Texas Intermediate trade well below long-run averages.
“Many investors worry it could rattle equity markets. We are less convinced,” Alastair Pinder, head emerging markets and equity strategist for HSBC Holdings Plc, wrote in a Jan. 20 note. The 36 major geopolitical events since 1940 saw US stocks rise 60% of the time in the three months that followed, he said. “The main exception comes when geopolitics drives oil prices sharply higher.”
Market Calm Disrupted by Trump’s Greenland Tariffs
Source: Bloomberg
There are other reasons that buttress a bullish view. The main pillar comes from corporate profits, which are projected to grow by roughly 9% in the fourth quarter and then by double-digit percentages for each of 2026’s periods. The artificial intelligence trade is still delivering riches to enough index heavyweights, while investors are warming to a broader swath of companies in sectors from health care to resources to consumer goods.
Last week ended with roughly 70% of S&P 500 Index stocks above their 200-day moving averages and the Russell 2000 Index and equal weighted version of the S&P at fresh record highs.
That’s “simply not the backdrop we’d expect to see ahead of a major top,” according to Chris Verrone, head of technical and macro strategy at Strategas Asset Management LLC. “Nothing prevents a consolidation here, particularly with sentiment so one-sided and ripe for a check, but we still defer to the longer-term trend for perspective.”
No one need look far for reasons the market might roll over. President Donald Trump has escalated his attempts to seize Greenland, threatening tariffs on eight European nations despite a July trade agreement between the EU and US. Japanese bonds plunged amid political uncertainty, dragging sovereign debt lower around the developed-market world.
The combination hit the S&P 500 to the tune of 2.1% Tuesday, the worst drop since October and enough to erase all gains this year. The Cboe Volatility Index spiked above 20 — hardly a sign of panic, but still higher than any time since the November AI slide.
Sentiment is also optimistic to the point of being worrisome. The closely watched bull-bear ratio from the American Association of Individual Investors had risen to the highest level since 2024, and fund managers’ equity positioning is hovering near 96%, according to a poll by the National Association of Active Investment Managers.
So far, earnings have delivered. In the first week of readouts from S&P 500 firms, 73% beat analyst expectations, above the average of 68% at this stage of the season, according to data from Bank of America Corp.
“If earnings season proves itself, then the other stuff should fall by the wayside,” said Dan Greenhaus, chief economist and strategist at Solus Alternative Asset Management LP.
Forecasters also expect the US economy will be lifted this year by tax cuts and real wage gains while inflation continues to ebb, factors that should bode well for stocks.
Then there’s the distinct possibility that Trump will “chicken out,” rekindling the TACO trade. The president famously walked back his April 2 tariff rates within a week of a market rout. Allianz Global Investors even said on Monday that European policymakers should fuel market turbulence to pressure Trump.
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Over at Barclays Plc, global head of equities tactical strategies Alexander Altmann told clients he maintains his risk-friendly stance in the near term, though perhaps with more volatility, at least until the earnings season is complete.
“The team is still constructive here but of course acknowledging that the volatility regime is shifting higher with this level of muzzle velocity from the administration,” he said. “That, in turn, may at times obfuscate the path for equities.”
That view was also echoed by JPMorgan Chase & Co.’s trading desk on Tuesday, with head of global market intelligence Andrew Tyler telling clients “stay long but hedge” as he remains tactically bullish, with near-term caution.
His team’s optimism is rooted in a resilient macroeconomic backdrop, positive earning growth and a thawing trade war, Tyler said in a note to clients.
“This framework is now being challenged, but it’s too early to suggest that the macro story deteriorates rapidly enough to flip bearish,” Tyler said. “We also think it’s too early to abandon US assets and think it’s better to hedge to the downside, especially if we see a Trump pivot coming out of Davos.”
— With assistance from Matt Turner
Alexandra Semenova is a reporter for Bloomberg News covering US stocks and investment strategy. She is also a regular contributor on Bloomberg Television and Bloomberg Radio.
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