On January 20, 2025, a new era began. The S&P 500 gained 3% in the first week of his mandate, but the following Monday, DeepSeek caused a downturn, resulting in a 2.7% drop in the index and almost a 17% loss for NVIDIA. The market managed to recover all its losses during that week. However, on January 31, he changed his mind multiple times regarding new tariffs, which had actually been announced long before. This led to another decline of 3.2%. Nevertheless, the economy remained strong, and by the next week, the index had regained all its losses.

S&P 500 index

Source: Bloomberg, InterCapital

As I mentioned in December, realized volatility is expected to be significant this year.

The market always anticipates certain events, and investors position themselves according to their investment strategies based on these expectations.

Trump has adopted an aggressive approach with his policies. In my opinion, he is primarily focused on geostrategic goals, seemingly indifferent to the economy. He appears unconcerned about rising inflation, as he has stated that new tariffs will contribute to inflation in the short term. He seems confident that the U.S. can sustain itself independently. Connections with the EU do not appear to matter to him, especially when discussing Greenland, because his strategic objective is to secure the northern region. His strategic focus includes the Panama Canal, which connects the East and West coasts, and he does not seem deterred by the fact that it involves the territory of another sovereign country.

He aims to protect U.S. territory from immigrants, which is why arrests began shortly after his inauguration. When two planes of immigrants were scheduled for deportation to Colombia, he announced an additional 25% tariff on all goods from that country because it refused to accept the deported individuals. Eventually, Colombia backed down and agreed to take back its citizens. This situation illustrates how negotiations under his administration will function: if countries do not comply with his demands, they may face tariff increases of 10%, 20%, 100%, or potentially any amount.

The question remains whether this kind of international politics is sustainable or if other countries will eventually reject his empty threats. In my opinion, it will be much harder for smaller countries that depend more on the U.S. than the U.S. depends on them.

Tariffs against Europe have been mentioned a few times, but they are still not imminent. Trump knows he cannot treat the EU like he does Colombia or Panama. The EU has a trade surplus with the U.S. (which Trump often highlights) and is among the top five trade partners for the U.S.

Newly imposed tariffs of 25% on Canada, the second-largest trade partner of the US, have been postponed for 30 days. This decision follows Canada’s commitment to enhance border security measures, including deploying additional personnel, drones, and cameras at the US-Canada border.

A similar situation occurred with Mexico, where 25% tariffs were also imposed but then postponed for 30 days due to new immigration policies and efforts to combat drug trafficking.

In a separate development, peace negotiations regarding Ukraine have begun with Russia, but notably, without the participation of any European countries or Ukraine itself. On the same day, six European countries expressed their support for Ukraine, stating that any peace resolution must involve cooperation with both Ukraine and the European Union.

Trump and his administration have outlined a list of strategic goals that need to be addressed, and they are employing some of the most aggressive methods to achieve these objectives efficiently.

The strategic goals in question encompass not only geostrategic and economic aspects, but also issues related to freedom of speech, ideology, and transgender rights. It appears that influential social platforms are already beginning to implement these objectives.

These developments are creating uncertainty in financial markets, as there are no clear expectations. It remains unclear whether we are on the brink of the largest trade war in history or if this is merely a bluff aimed at achieving smaller goals. As a result, many investors find themselves unprepared, and it is uncertain how long the markets will remain affected by this news.