Trump's Second Term: The Market Trembles with New Threats and Old Fears

January 21, 2026 - The markets are shaken again. President Donald Trump has begun the second year of his second term, and the volatility associated with geopolitics and trade wars seems to be returning.

Uncertainty looms over investors

Investors, accustomed to assets recovering quickly, fear that this time the damage may be more lasting. Volatility in different asset classes has increased. Along with this, stocks, long-term US government bonds, and the US dollar fell on Tuesday. This happened a day after Trump threatened to resume the trade war with Europe over the US's desire to acquire Greenland. This threat could destroy the political and military alliance that has supported Western security for decades.

Talks about "Selling America" have been revived. This is a trade trend that emerged after the announcement of tariffs last year. Investors are avoiding US assets. According to Jack Ablin, founder and chief investment strategist at Cresset Capital, global investors are taking these threats seriously. He shares that he had assumed that after "Liberation Day," many investors would take advantage of the sell-offs and try to find a bottom, but this time it doesn't seem to be happening.

Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, shared that market actions remind him of last year. The market reached its peak in late January or early February. After the news of the tariffs hit the headlines, the market underwent a pretty good correction. Tuz hopes that this time there will be no dramatic changes.

Concerns about investors' patience

Although Trump has shown flexibility regarding tariffs when markets are under serious pressure, investors fear that significantly more fluctuations may be needed before the Greenland situation is resolved. The decline worries investors because it has affected many assets. Lauren Goodwin, head of the global market strategy team at New York Life Investments, said that a day like today, in which bond yields are up, stocks are down, and the dollar has weakened, makes people rethink some of their assumptions.

The S&P 500's 2.1% drop on Tuesday, the largest single-day drop in more than three months, it seems that buyers have not appeared. The three consecutive years of double-digit returns catapulted market valuations to high levels, which made stocks vulnerable to bad news. According to Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments, everything is now priced close to perfection, and it's time to hedge or consider some defensive options in case another geopolitical event hits the headlines.

Fear of market corrections

However, few investors were willing to give up US stocks to a large extent. According to Michael Rosen, chief investment officer at Angeles Investments, there is sense in the margin to diversify assets outside the US, but he would not give up the US, given the very strong returns of American companies.

With the reporting of fourth-quarter results in the coming weeks, S&P 500 earnings are expected to grow by 13.3% in 2025 and by another 15.5% in 2026, according to LSEG IBES. Still, if foreign investors sell US stocks, this could affect the market. Ann Walsh, chief investment officer at Guggenheim Partners Investment Management, shared at the Reuters Global Markets Forum that the basic story is good, but there is an aspect of supply and demand, and some of the foreign flows may not enter the US and as a result, this may reduce returns.

According to Alex Morris, CEO and Chief Investment Officer of F/m Investments, if this continues to develop, then suddenly you will have a problem, but we have not reached that point yet. One of the reasons investors are not completely leaving stocks is the possibility of Trump negotiating a retreat from his initial position.

Tom Graf, chief investment officer at Facet in Phoenix, Maryland, said that he definitely thinks that traders are worried about betting everything on one declining trade because of the potential for "TACO" - the Wall Street acronym for "Trump Always Chickens Out." Graf, who has a "very large" non-dollar allocation and significantly undervalued long-term government bonds, sees no need for an immediate reaction.

The White House did not immediately respond to a request for comment. According to investors, any strong retreat from the market could attract buyers. Jim Carroll, a senior wealth advisor and portfolio manager at Ballast Rock Private Wealth in Charleston, South Carolina, asked if this is the next TACO trade, where Trump messes things up and then backs down. There will certainly be a certain number of investors who may see it that way.

What will happen from here on? Will the markets withstand the new challenges or will investors' fears be justified? Time will tell.