Risk-on sentiment makes its way back to stock markets after Greenland de-escalation

Over the next two sessions, the S&P 500 Index is expected to maintain a balanced yet watchful stance, with volatility likely to persist. This follows a dramatic session on January 20, when the market delivered its worst single-day performance since April (indices fell 1.5–2.4%) amid flaring trade tensions between the United States and the European Union. A tentative technical rebound occurred on January 21 following key remarks from President Donald Trump. Still, investor sentiment remains choppy and doubtful.

The pivot point in this process was a clear de-escalation in rhetoric. The American leader shifted from making threats to bluntly stating in Davos, "I will not use force," and reframing the Greenland issue as negotiable. This marked a notable walk-back from his earlier hints of a "hard way" to get the island. 

Such a moderate tone extended to trade policy. After threatening a 25% tariff on EU goods, Trump announced on January 21–22 that he was suspending those measures, originally set to take effect on February 1, citing progress toward a "framework for a future agreement" over Greenland. 

The SPX sell-off was a direct response to the risk of armed conflict. Now that this scenario is off the table and the dispute is going into the murky swamp of diplomacy, the most acute fear has been defused. In fact, the escalation has effectively been reversed, thus throwing away the immediate catalyst for sustained panic. 

Looking ahead, the market faces a mix of crosscurrents:

Earnings season reality check. Corporate results are now under a microscope. However, even strong reports in 2026 have elicited a muted reaction, as investor expectations were sky-high.

Persistent trade friction. Although the immediate crisis has subsided, underlying US-EU trade tensions continue to overhang equity sentiment. 

Tech sector in crosshairs. Unbridled optimism surrounding artificial intelligence fuels ambitious long-term forecasts for the index. For example, Goldman Sachs projects its hike to $7,600 within a year. Nevertheless, the tech-led rally shows signs of being overextended in the short run and is ripe for consolidation.

The ultimate recommendation is to buy SPX. Lock in profits at $7,100. Place Stop Loss at $6,700.

Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.