:max_bytes(150000):strip_icc()/GettyImages-2256719248-8922e2f7c094409ab41b3f63a92ee64a.jpg "Why This Wall Street Strategist Is ‘Inclined To Buy’ as Greenland Tensions Batter Stocks")
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Key Takeaways
- The S&P 500 is unlikely to pull back more than 5% amid resurgent concerns about a U.S.-EU trade war, according to one Wall Street analyst, who expressed confidence in the stock market’s outlook.
- Stocks posted their worst day in months on Tuesday as markets reacted to President Trump’s threat of imposing tariffs on European goods to force the continent give in to his demands that the U.S. acquire Greenland, a semiautonomous territory of fellow NATO member Denmark.
Stocks posted their worst day in months on Tuesday. Some strategists say it’s an opportunity.
“I think at worst maybe you get a 4-5% drawdown here—call it 6,500 on the S&P. I’m inclined to buy it because I think the set-up into this was quite good,” Chris Verrone, chief market strategist at Strategas, told CNBC on Tuesday.
The S&P 500 fell 2.1% Tuesday to about 6,800 as investors responded to President Trump’s threat to impose tariffs on select European countries if they refuse to allow the U.S. to acquire Greenland.
Why This Is Important
The renewed threat of a U.S.-EU trade war injected fresh uncertainty into global markets on Tuesday, but some investors believe the stock market remains on solid footing, ready to rebound when the conflict over Greenland is resolved.
Verrone said signs of “a pro-cyclical recovery… through all different asset classes—bond yields, commodities, transports, retail, banks,” underpinned his bullish outlook. The pullback to start this week, he said, could even help to cool sentiment that Verrone said “was getting a little too hot” and posing a risk to the stock market.
As with last year’s bouts of Trump-driven volatility, “the bark will be worse than the bite on this issue,” wrote Wedbush analyst Dan Ives of Trump’s new tariff threats.
Wall Street coined a special term for Trump’s bombastic approach to diplomacy: the TACO trade, short for “Trump Always Chickens Out.” Investors who braved the volatility unleashed by Trump’s “Liberation Day” tariff announcement last April were handsomely rewarded for sticking with it. The S&P 500 rose nearly 40% between its early-April lows and the end of the year.
Ives expressed confidence on Tuesday that negotiations between the U.S. and EU would eventually ease tensions and lead to an agreement on Greenland. “Ultimately we view this as an opportunity to own the tech winners for 2026 and beyond,” he wrote.
Treasury yields soared on Tuesday, with the 10-year yield breaking 4.3% for the first time since September. Yields have climbed in recent months amid uncertainty about the direction of inflation and the health of the labor market, as well as worries about President Trump’s efforts to control the Federal Reserve’s rate-setting policy group.
“It was accompanied with cyclical stocks outperforming,” said Verrone of the recent uptick in yields. “To us, that’s a message that, ‘Hey, this is about economic growth getting better.’”
The U.S. economy grew at an annualized rate of 4.3% in the third quarter, up from 3.8% in the prior quarter, according to the most recent report from the Bureau of Economic Analysis. The S&P 500 is expected to report earnings grew about 14% in the fourth quarter, according to FactSet Research.
