Selling SPX if Greenland crisis goes on

The US stock market has been on shaky ground since the Greenland issue emerged on the global stage. Let’s analyze the current headwinds for the S&P 500 Index (SPX), with the key risks detailed below:

1. Tariff disputes and trade tensions

American President Donald Trump has recently announced the introduction of 10% import duties on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland, effective February 1, 2026.

If the Greenland buying issue remains unresolved, these tariffs could surge to 25% by June 1, 2026.

The European Union, for its part, is not going to leave this situation unanswered. The bloc is now preparing counter-sanctions worth €93 billion, which could be a painful blow for American exporters and transnational corporations. 

2. US asset selloff

Deutsche Bank is urging traders to be cautious, warning of potential massive capital outflows. European governments may start getting rid of about $8 trillion in American stocks in response to the Trump administration’s actions, a move that could trigger a sharp decline in US equities and bonds.

3. Tech sector risk

NASDAQ and S&P 500 futures are currently plunging on fears that the US-EU trade standoff will affect tech giants’ earnings.

4. Atypical USD and safe-haven asset behavior

Unlike any other crisis, the greenback is now losing its power due to the Trump administration’s decisions, which traders perceive as the source of current risks. Consequently, capital is flowing into gold.

Bullion prices are flying higher than ever amid the burning Greenland issue. Investors have been withdrawing large amounts of money from stocks and moving them into safe-haven assets since the start of 2026.

5. Fiscal stress

A potential purchase of Greenland is estimated at about $700 billion, which would burden the already overstretched US budget. This is particularly concerning as the Federal Reserve (Fed) maintains elevated interest rates, painting a grim picture of increased government debt and stubborn inflation.

Given these factors, the US stock market is highly susceptible to volatility. The first surge is anticipated on February 1, when the 10% import tariffs should be imposed. All eyes are also on this week's talks in Davos, which could either defuse the situation or confirm a path toward a protracted conflict.

The overall recommendation is to sell SPX if the US-EU trade standoff escalates. Profits should be taken at $6,150. Stop Loss could be set at $7,200.

Always size the position so that your potential loss (protected by a Stop Loss) is no more than 1% of your account balance. If you can't open a position that meets such a risk criterion, it's safer to skip this trade and wait for a better, lower-risk opportunity.