Donald Trump’s moves on Greenland threatened to cause the biggest upset on financial market since last April’s Liberation Day, an event that knocked shares for six.
Fortunately, a U-turn on 21 January by the US president subsequently brought a sense of calm. It was good reminder for investors to not panic in times of turmoil.
It’s fascinating to explore why financial markets moved in a certain way during this period, and how that shaped investor choices.
What was the trigger for market volatility?
The drama started with the Trump administration ratcheting up pressure on Europe to accept its territorial demands on Greenland.
Trump used his social media platform Truth Social on 17 January to threaten new tariffs on European countries which sent personnel on a recent exercise to the autonomous territory within the kingdom of Denmark.
Hints at the possible use of military action if the US was unable to acquire Greenland by other means added to financial market stress.
Which parts of the stock market fell?
European companies including car manufacturer BMW, luxury goods specialist LVMH and drinks group Diageo were among those impacted when markets opened on 19 January. They all do big business in the US and stood to lose out if Trump went through with threats of 25% tariffs from June on certain European countries including Germany, France and the UK.
Their goods would be more expensive for US buyers when factoring in tariffs, making the items less attractive and potentially encouraging customers to look for alternatives.
What happened to defence stocks and gold?
The FTSE 100’s exposure to defence contractors and precious metals miners saw it fall less than its European counterparts, as both areas were in demand with investors.
Defence stocks such as BAE Systems have already seen their shares benefit from pledges by various governments to spend more money on military and cybersecurity activity.
In theory, the prospect of Trump invading Greenland might cause investors to believe defence budgets could go up even more globally and further enhance the earnings prospects for defence contractors.
Gold hit fresh record highs of $4,887 per ounce on 21 January amid a deepening sense of crisis. Gold is often favoured by investors during times of uncertainty as a potential store of wealth.
On 20 January, Wall Street chalked up losses as trading resumed on the US stock market following a public holiday. The Nasdaq index saw notable pressure amid concerns about possible retaliatory action from Europe against America’s big tech contingent.
What triggered a market rebound?
Markets remained volatile on 21 January until Trump gave a speech at the World Economic Forum in Davos where he ruled out the use of military force to obtain Greenland. This immediately sparked a rebound in financial markets, with the S&P 500 index in the US rising by 1% and the major European indices reversing earlier losses.
A subsequent announcement, again on Truth Social, that the tariff threat was being withdrawn saw an extension in the relief rally. Markets pushed ahead on 22 January as investors appeared to regain confidence.
It was notable we didn’t see a complete reversal in investor preferences that day. You might have thought the areas of the market that did well during the ‘worry’ period leading up to Davos would have then been the worst performers during the market rebound. Instead, shares in defence stocks and the price of gold held firm, perhaps as ‘just in case’ trades should Trump find new ways to cause upset.
Top buys and sells for AJ Bell DIY investors so far in 2026
Monday 19 January, Tuesday 20 January and part of Wednesday 21 January were testing times for investors, as global equity markets wobbled. Donald Trump’s more aggressive stance around Greenland was unsettling and there were common themes among investor choices.
Looking at net buys over the three-day period, AJ Bell DIY investors went big on investments linked to gold, silver and defence. That tallies with movements recorded across global markets as three areas where asset values went up.
We also saw multi-asset funds and global equity tracker funds in demand, suggesting many investors kept calm and carried on as normal. These types of investments rank among the most popular choices for people who put a set amount of money into the market every month.
US funds went out of favour
Volatile market conditions didn’t prompt many AJ Bell DIY investors to sell a lot of their assets, but it was notable that Baillie Gifford American was the second most heavily sold fund among this investor base in the 19-21 January period, and year-to-date.
Also based on total net sells on the platform, the second most heavy sold ETF by AJ Bell DIY investors was iShares S&P 500 Info Tech Sector ETF, a passive fund tracking the performance of US tech stocks.
Whether those trends were down to investors losing faith in the US as a place to invest, objection against the Trump administration’s actions, or simply in recognition that US equity valuations are high, is unknown as each person will have their own reasons to sell a holding from their ISA or pension.
Most popular stocks so far this year
Year-to-date, the most popular net buys among individual stocks were utility provider National Grid, healthcare group GSK, and food-to-clothing retailer Marks & Spencer, implying that investors were proceeding with caution.
Utility stocks often catch investors’ attention when they are looking for companies whose goods and services might remain stable no matter what’s going on in the world. This also applies to healthcare stocks.
As for M&S, its fortunes fluctuate more in line with economic activity, but investors might simply have warmed to a trading update on 8 January that pointed to strong food sales over Christmas.
What can we learn from the latest market gyrations?
Patience matters when it comes to investing. There is always something going on in the world to worry about but that doesn’t mean investors should constantly tweak their portfolios. Staying focused and sticking to a plan can yield benefits down the line.
It’s important to keep a cool head when it comes to investments. Focus on making sure portfolios are diversified and reflect the risk you are willing to take. Your investments can become unbalanced over time if they aren’t brought to heel every now and again.
In today’s climate it’s easy to fall into the trap of adapting your portfolio according to Donald Trump’s posts on Truth Social, and while these are clearly important, it’s worth bearing in mind your investments are a long-term project which will outlast the current US administration.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
