MW Trump, Greenland and the mounting fear of war: How the stock market reacts to big geopolitical events.

By Jules Rimmer

Major geopolitical risk events of the last twenty-five years have invariably proved to be buying opportunities in the end

HSBC's strategists believe Trump's original demands and tariff threats are maximalist and and will be dialled back gradually as a compromise is sought

The Greenland crisis, and the tariff risk it's thrown up, has triggered a sell-off across most asset classes, including a trifecta of declines in U.S. stocks, bonds and its currency.

The S&P 500 SPX slumped 2.1% on Tuesday as the 10-year Treasury BX:TMUBMUSD10Y rose 6 basis points and the dollar fell vs. the euro, the British pound and the Canadian dollar. The kneejerk flight to safety lifted only a few traditional haven assets like the Swiss franc (CHFUSD) and gold (GC00).

For HSBC's strategists, however, geopolitical risk events like this one invariably present a buying opportunity once the dust has settled. In a note published Tuesday, chief multi-strategist Max Kettner observes that in the past twenty-five years, 75% of crises are "faded," by which he means the negativity dissipates and the markets gradually recover," and so on this occasion, he and his team refuse to heed calls that "this time is different".

   S&P 500 performance after major events 
   Event                                       Date      t       t+1 day  t+5 days  t+22 days 
   USS Cole bombings, 2nd intifada             10/12/00  -2.50%  3.30%    4.40%     1.70% 
   September 11 attacks                        9/11/01   -4.90%  -0.60%   -9.80%    0.60% 
   US invasion of Afghanistan                  10/7/01   -1.40%  2.30%    1.80%     4.30% 
   US names sponsors of terror                 3/1/02    2.30%   2%       2.90%     0.50% 
   Moscow theatre hostage crisis               10/23/02  0.70%   -1.50%   -0.60%    4.30% 
   Before Iraq invasion                        2/1/03    0.50%   -0.14%   -3%       -2.80% 
   Iraq invasion                               3/20/03   0.20%   2.30%    -0.80%    4.20% 
   Madrid bombing                              3/11/04   -1.50%  1.20%    1.40%     2.10% 
   Beslan school siege                         9/1/04    0.20%   1.10%    1.20%     2.80% 
   London bombings                             7/7/05    0.30%   1.20%    2.40%     2.20% 
   2006 transatlantic aircraft plot            8/1/06    -0.40%  0.60%    0.10%     2.80% 
   Obama announces troop surge in Afghanistan  12/1/09   1.20%   0%       -1.50%    2.30% 
   Arab Spring                                 3/1/11    -1.60%  0.20%    1.20%     1.60% 
   North Korean satellite exploded             4/12/12   1.20%   -1.20%   -0.80%    -3.40% 
   Boston Marathon bombings                    4/15/13   -2.30%  1.40%    0.70%     7.10% 
   Russia annexes Crimea                       3/1/14    -0.70%  1.50%    1.10%     1.60% 
   Missile hits plane in Ukraine               7/1/14    0.70%   0.10%    0.00%     -2.30% 
   Paris attacks                               11/13/15  -1.10%  1.50%    3.30%     2.70% 
   San Bernardino shootings                    12/2/15   -1.10%  -1.40%   -1.50%    -2.90% 
   Syria tensions                              4/1/18    -2.20%  1.30%    -1.40%    0.60% 
   US-Iran tensions                            7/1/18    0.30%   -0.50%   2.50%     3.60% 
   US-China tensions                           8/1/19    -0.90%  -0.70%   -0.50%    -0.70% 
   US-Iran tensions                            1/3/20    -0.70%  0.40%    1.00%     3.20% 
   U.S. troop withdrawal from Afghanistan      4/14/21   -0.40%  1.10%    1.20%     1.30% 
   Russia invades Ukraine                      2/24/22   1.50%   2.20%    1.80%     6.80% 
   Israel-Hamas war                            10/7/23   1.20%   0.40%    1.50%     1.80% 
   Israel begins operations in Gaza            10/27/23  -0.50%  1.20%    5.90%     10.80% 
   Israel strikes Iran nuclear sites           6/13/25   -1.10%  1%       -0.10%    4.60% 
   Average                                     -0.50%  0.70%    0.50%     2.20% 
   Hit ratio                                   42.90%  75.00%   64.30%    82.10% 
   Source: Bloomberg, HSBC 

Kettner cites the most recent examples of the 2025 meltdowns after President Donald Trump on April 2 announced what he called "Liberation Day" tariffs, and the Israeli attacks on Iran, as evidence for the success of adopting a strategy of looking through short-term volatility. He expects something like a repeat of last year's pattern where Trump made maximalist demands at the outset but then gradually dialled down both the demands and the accompanying rhetoric to reach a compromise.

Not that Kettner and his team are complacent: he warns that U.S. rates and risk assets are close to the "danger zone." He views the 4.4% level on U.S. 10-year yields BX:TMUBMUSD10Yand 5% on the long bond BX:TMUBMUSD30Y as crucial support, and were another wave of selling to breach those levels, then prolonged weakness across asset classes might be the outcome.

Kettner, though, does not foresee this. He argues that economic activity in the U.S., the labor market and inflation are "firmly in a Goldilocks backdrop" that should keep the Fed dovish and prevent a repricing of the expectation of another two rate cuts in 2026.

Moreover, Kettner interprets the backwardation in the VIX VIX futures curve - whereby short-term contracts are more expensive than those further out - as a technical indicator that markets are already oversold. He also maintains that fourth-quarter earnings, given low sequential expectations, have an easy benchmark to exceed, thereby bolstering sentiment toward stocks.

-Jules Rimmer

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January 21, 2026 09:20 ET (14:20 GMT)

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