Making sense of the forces driving global markets

By Jamie McGeever, Reuters Open Interest Markets Columnist 

Stocks, bonds and the dollar tumbled on Tuesday, as U.S. President Donald Trump's threat to reignite a trade war and sour relations with Europe over Greenland rattled investors, propelling safe-haven gold to yet another record high.

More of that below. In my column today I look at the latest wave of Trump-fueled uncertainty crashing over world markets, and ask the question: can investors really adequately price such fundamental shifts in the world's geopolitical tectonic plates?

I’d love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

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* 'De-dollarization' back with a bang

We got a glimpse around the 'Liberation Day' tariff chaos last year of what 'de-dollarization' could look like, as investors baulked at U.S. President Donald Trump's bellicose economic and geopolitical policies, even towards America's allies.

The trade fizzled out, but could be back with a bang as the world recoils at Trump's stance on Greenland, and Europe more broadly. The dollar, Treasuries and Wall Street all tanked on Tuesday - a toxic combination that Washington won't want to see repeated too often. Will markets force Trump to de-escalate?

* The chimes of JGBs crashing

Tuesday was an historic day for Japanese government bonds. Prices plunged on worries around the snap general election called by Prime Minister Sanae Takaichi for February 8. The long end of the curve got crushed, and the 30-year yield rose a record 26 basis points. 

There is a danger that Japan is losing control of the long end of the curve, as a 'doom loop' of investors dumping JGBs and the country's rapidly deteriorating fiscal dynamics intensifies. Unless the Bank of Japan steps in, there are few buyers, if any.

* Global risk ratchets up

The global investment landscape at the start of 2026 is an inhospitable one. From Venezuela to Greenland, Iran to Japan, politics and markets are creating severe challenges for investors. Risk is piling upon risk, and implied volatility is accelerating higher.

Big swings in stocks and currencies are hard enough to navigate, but bond market tremors are more dangerous. Surging borrowing costs suggest sovereign debt is no longer a safe haven, but is instead sounding inflation and risk premium alarm bells. Difficult terrain for investors and policymakers alike.

U.S. President Donald Trump's latest foreign policy and trade war salvos are upsetting global markets, but the question is whether these ructions will escalate or fade away, as was the case during the last 12 months. 

The latter is probably more likely, but either way, it is apparent that investors are struggling to adequately price the fundamental shifts in the world's geopolitical tectonic plates.

And the shifts that have already taken place in 2026 are truly breathtaking. The Trump administration has removed the leader of Venezuela, and now appears to be the Latin American country's de facto ruler. 

A violent crackdown on protests in Iran has killed thousands, with the threat of a U.S. response still lingering. 

And then there is Trump's latest push to acquire Greenland from fellow NATO ally Denmark by any means necessary. The U.S.-Europe alliance, and indeed the very rules-based global order built since World War Two appears to be in jeopardy. 

The economic and financial terrain is a minefield too. Trump has issued a host of interventionist decrees on issues from credit card rates to mortgage-backed securities, while also pressuring U.S. oil executives to invest billions in Venezuela. And lest we forget, his Justice Department is still threatening to indict Federal Reserve Chair Jerome Powell.