Not so long ago, investors were assessing the significance of the arrest of Venezuelan President Nicolás Maduro. That now seems like the distant past after recent tensions over Greenland.
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For all the headlines, the market impact of the Trump administration’s efforts to acquire Greenland was limited. At the low point for equity markets on 20 January, US and European markets were down by just 2% compared to the 9% to 12% declines after ‘Liberation Day’ last April. The price of gold rose further, up by 4%, as there are nonetheless longer-term implications for investors from the significant changes in geopolitics and global trade that continue to unfold.
Another asset that could see a more meaningful price impact is the US dollar as foreign investors sour on the appeal of US assets (the ‘sell America’ trade). While this can be a factor for some, it is not clear that the dollar has moved much because of it.
The greenback lost just $0.01 versus the euro over the last few days. In 2025, it fell by 5% in real, trade-weighted terms, but this followed a nearly 50% appreciation since 2011 and is less than the 9% decline seen during the first Trump administration (see Exhibit 1).
Moreover, foreigners are not in fact selling US assets. In the seven months since ‘Liberation Day’, net foreign purchases of US assets totalled $1.2trn, nearly double the inflows in the seven months prior.
The near-term consequences for markets and economic growth of events in Iran, Venezuela and Greenland are not clear, and as a result, the muted reaction of markets is correct, in our view. If one believes lower oil prices may be the result, then the impact should be positive.
Rotation or rebalancing
One expectation for equity investors in 2026 is that index returns will be more balanced between technology and non-technology sectors, with some even looking for a rotation from growth to value resulting in superior value-sector returns.
To some degree, this has occurred. Since the beginning of the year, the Russell 1000 Value index has outperformed the tech-heavy Nasdaq 100 by three percentage points after underperforming by 6ppt in 2025 (see Exhibit 2).
In emerging markets, however, this has not been the case. It is important to recognise that the technology sector has been as important a driver of EM performance as it has been in the US.
The gap between the performance of tech and non-tech sectors in emerging markets in 2025 was even greater than that between the Nasdaq 100 and Russell Value, with EM tech beating non-tech EM by nearly 40ppt.
That pattern has continued this year. EM tech stocks (primarily in Taiwan, China and South Korea) have gained 11% so far in 2026 compared to just 4% for non-tech. Given what we expect will be a positive earnings season for US tech stocks, and a superior earnings outlook for the year, we expect the now lagging Nasdaq 100 index to regain the upper hand in the months ahead.
The outlook then is not for non-tech outperformance, but for a narrowing of the gap between the two. In a sense, this has to happen.
Concerns over an artificial intelligence bubble remain, with the fundamental questions being how tech companies will make a return on their significant capital investments.
The necessary evolution of the AI revolution has to be that tech companies sell their products to non-tech companies, who then use the technology to either increase revenues or cut costs, leading to faster earnings-per-share growth.
If this does not occur, then worries about an AI bubble may turn out to have been well founded.
