Trump Headlines Move Markets: Federal Reserve, Defense Stocks, Housing

Hello and welcome back to another episode of Blue Chip Now! you have Daniel Dusina, Chief Investment Officer; Matt Mondoux, Senior Financial Advisor; and Dan Seder, managing partner. You know, it’s been a volatile couple of weeks for global markets. Some of the main drivers we’ve seen are geopolitics, tariffs and just generally some some semblance of a flight to safety.

Stocks have whipped around. Gold has gone vertical. And investors are once again questioning how much political risk they need to price in. Just very challenging. So what we’re going to do today because of how things have jumped around is to try to highlight five of the stories that mattered the most, at least in our view. Sound good you guys?

Sounds good. Okay, so number one, we’ve had, tariff threats returning to the fold, common theme from 2025. But at any rate, tariff threats are once again starting to jolt global markets. Markets were rattled specifically after the US threatened new tariffs on several European countries tied to escalating tensions over Greenland. You had President Trump threatening tariffs on, allies including Denmark, Norway, Sweden, France, Germany, the Netherlands, the list goes on, unless they allow the US to advance its interests around Greenland.

The plan was to start with 10% tariffs on imports from February 1st, rising to 25% by June 1st. If no resolution was reached. So, as you might expect, markets reacted sharply. Global stock markets slid, most pointedly in Europe and across the EU. But also in the US you saw equities, trading downward. In addition to that, in the currency space, the euro softened as investors moved into more safe havens.

Also had volatility spike on this news. The VIX signaled an increase in fear in the markets. Generally speaking in the US stock benchmarks experienced broad declines. While you saw some gains in the more safe haven type assets such as gold and silver as traders hedged risks. So why this matters? And this will be somewhat of a segue into next point.

But, you know, tariffs do directly hit corporate earnings expectations and global growth assumptions. And, you know, even though these are hypothetical, it’s even the threat of that is enough to spike volatility. And I think perception is reality right. So when you have a situation like this it can very easily get walked back and change, just like we saw thereafter.

So let’s break that down. Part of the reason I believe it was changed because Donald Trump views the stock market as a barometer of success. And so if markets are up, he’s going to be happy. And that happened under his watch. I don’t think any US president wants markets to be down during their time. But as comments are released regarding Greenland and the use of military force, he walks those comments back.

It’s easy to walk back those comments much easier than walking back after action is taken. So he walks back. His comments. The markets recover and actually go go beyond, Monday mornings open. So yeah, to me, I think it’s a reflection of the market, not bullying him around, but in a sense, him being aware of what the market’s reaction is and he wants.

Yeah. Well, I guess, you know, as you alluded to, the whole the whole thing is that just days after the initial commentary, markets snapped back specifically after the U.S softened its stance. And I guess it’s just it makes it challenging as an investor when you have this snappy type of market because, you know, if you have one variable in a person that can dictate the direction of a market, that just becomes challenging.

And ultimately it I mean, you can talk about long term ism, but, you know, that’s it. So what does it mean to our clients? What does it mean to investors. It means you have to stretch out your your time frame. So what you can’t look at this market with is a lens that is hour by hour or even day by day.

Because today’s news might look different than tomorrow’s sentiment or the rhetoric or the headlines. And so day by day is too fast. Week by week might even be too fast. You might even need to slow down to look at monthly data. But the longer, the further out you look, the more reliable the data will become. In the short term, it’s unpredictable and it’s unreliable.

I would encourage all investors not to view the stock market day to day because it doesn’t make sense. It’s just an emotional roller coaster.

Yeah, yeah I mean it’s the back and forth right now. Highlights how like headline driven the markets are right now. And the fact that sentiment can so quickly flip again, it just doesn’t behoove any investor to try to time commentary or time these markets.

I think, you know, investors have seen enough of this, but they also need to remember to prepare for this. And one way might be, you know, to Dan’s point, looking at monthly statements, but the other way is, you know, putting the blinders on and ignoring some of the noise, because it is challenging. I mean, people see big swings in accounts and it’s, it’s real and it makes it tough.

But but yeah, I mean, the more long term perspective you can have, you know, you know, hey, reach out to your team at blue Chip. There’s things that you can do to, to hopefully help.

Yeah. Because if you zoom out over a longer period of time, the idea is that over a long period of time, what you’ve seen in the market will be a reflection of actual fundamentals of businesses, either improvement or deterioration, whereas trading off of like a hypothesis, for example, or hearsay, he said.

She said, you know, that just that doesn’t benefit anybody. Right? And so let’s let me just take that one step further. So when we say stretching out the time horizon, if you were looking at the markets on an hour by hour basis, you would get an update each hour. If you were looking at the markets on a day by day basis, it means that you would get an update at the end of the market close every single day to help you make your decisions that, good or bad, month by month means intra month.

You’re not looking at your accounts. You’re not looking at the markets. You’re making decisions once a month. At the end of the month, let’s stretch it out to year by year. That would be like looking at your accounts once a year only, right? So you have much less noise when you go out further. So so stretching that time horizon out reduces the volatility mitigates the volatility.

The the the new the volatility.

Yeah. Well I mean I think the poster child of of that what you’re outlining is 2020. Right. Because if you went to sleep on December 31st 2019 and said oh okay. Market had a great year in 2019, you went to sleep for 365 days and you woke up on December 31st of 2020, said, oh, market had another good year, right?

So great. Great example. Yeah. Other action items. You know, you’ve had the the Federal Reserve somewhat in the limelight, not just because of the rate cutting trajectory that they’ve embarked on, but the whole idea behind fed independence has been somewhat in question. The Federal Reserve is intended to be an independent body, not, housed under the general political structure of the United States.

It’s an independent body that will be making decisions independently. But there’s been some questions related to that. Under the tenure of the most recent administration. But what I would say is that you’re starting to, to get, some of this independence fear getting calmed. You’ve had markets that have been paying very close attention to this, specifically as, you know, members of the administration have been putting in an increased amount of political pressure on the federal Reserve, but you’ve had volatility starting to fade, at least pertaining to this aspect, as other things have come to the forefront.

You know, I would submit that over the next couple of weeks, even some of the macro stuff is going to become a lot less important than, you know, the fourth quarter reads on company level earnings. So yes, the the faith in the central bank and their independence is foundational. But I wouldn’t be surprised over the next three months, as you continue to see this pop up, if it, you know, I’m going to just guess that this stokes continued volatility.

As you get rhetoric on this, I would say this is something it’s important. I mean, I don’t think it’s a coincidence that we’ve had a relatively strong central bank for quite a long time. We’ve had strong markets. I mean, there’s there’s always your hiccups, you know, along the way in the form of recessions. But you’re generally speaking, you know, they’ve done a good job.

So, yeah, you you kind of want to continue to see see that trend continue in the future.

Yeah. And I’ll throw this out in an environment that is extraordinarily volatile politically. I always say politics plays no role in a portfolio. Really a lot of us, a lot of us think because of the polarization between the left and the right, that, you know, your political views can have an impact.

What the Federal Reserve does is much more powerful than politics. The Federal Reserve, in moving interest rates and monetary policy. This is what moves markets. It is very, very important. Keep your eye on central banks. Keep your eye on monetary policy. It’s much more impactful to your portfolio than the headlines on whatever media station is your favorite.

Yeah. Well, and I mean, clearly investors are paying attention to this because as we alluded to at the onset of this conversation, but one of the clearest signals of investor anxiety is gold and precious metals. You’ve had gold that has surged to record highs, blasting through $5 an ounce. Central bank buying. What did I say? So $5.

Yeah, I’ll take that. Anyways, $5,000 an ounce, record high. You’ve had central bank buying, geopolitical risk and generally a softer U.S. dollar that have served to help fuel the rally. And it’s not just gold, it’s silver and other precious metals as well. So why something like this matters is because of what I said at the onset.

You know, anxiety moves like this in gold, and precious metals usually signal deeper concerns about financial stability or inflation or geopolitical risk, regardless of what the stock market is doing. So, you know, I don’t think we’ve seen a run like this in gold in a very long time, but there are a number of factors that have kind of coincided the dollar and some of the the fed independence items that have served to to beef up the price of gold in gold’s very, you know, cyclical gold kind of goes through these spike periods and then they decline and it really goes nowhere for quite a long time.

So so this is, you know, Gold’s day in the sun. And you know, it’s all the issues that Daniel alluded to previously, you know, as justification for a rally.

Yeah. And you also stocks, you know, that are really you know I want to see that they’re right all time highs. So you know the opportunity cost of buying gold which pays no income, no dividends.

And stocks that are in dividend yields, all else being equal are low because stock performance has been so strong. You know, you can see how investors you know might allocate a little bit.

Yeah that’s a great point. I’ll wrap up with this last bit here. You have broader Wall Street right now that is looking ahead to a very busy 2026.

Despite all the noise and all the volatility that that we’ve kind of cited, you have investment banks that are feeling really, really confident. After some pretty strong dealmaking momentum, Wall Street expects M&A, IPOs and general capital markets activity to stay fairly robust in 2026. The reason that this matters is because when bankers are optimistic, it usually signals corporate confidence and a belief that markets will remain open for business.

So, you know, these bankers are probably just parroting what they hear from a sentiment perspective from corporate leaders that they’re interacting with. Right. So specifically some some recent details that I would call out, bankers expect high deal flow in 2026, a busy year for deals, continued demand for mergers, acquisitions and IPOs. Some of that could be related to relatively lower interest rates.

You also have major IPOs in the pipeline. Some of the notable ones potential blockbuster IPO from SpaceX is is certainly going to be sought after and well followed. You also have strong investment banking revenue trends. So the broader market data that we see suggests a surge in investment banking revenue overall, with industry fee income reaching nearly the highest levels since 2021, with projections indicating a further step up in 2026.

So the fact that you have these robust deal pipelines, strong equity market and private equity, private equity, all is drivers. I think that there’s there’s some reasons to be optimistic. And then, you know, just kind of putting closing the loop on it. You have firms let’s call it the bulge bracket investment banking firms in the US that are talking about how robust their pipelines are.

And I think that generally speaking, while this in and of itself might not be the most important anecdote to call out, the fact that you see this optimism in the plumbing of our financial system is is it should be taken very positively. It should be a source of optimism because numbers don’t lie. And the fact that we have a whole heap of interest in whether it’s IPOs or just general banking activity, at least on the corporate side, I think that’s actually pretty exciting.

Yeah. No, I agree, I mean, that’s that’s one of the positives out there. I think it’s it’s easy to, you know, counselor, get bombarded with the negatives in the negative headlines. But but generally speaking, I mean directionally for investors, for markets, it’s a good thing.

Yeah. Anything else guys before I wrap us up, Scottie Scheffler it’s not human either.

Super Bowl pics movie record again for let’s see probably what, two weeks probably won’t. I’ll take the Patriots on on personal bias alone. I can’t watch a team that has dominated the NFL trajectory of my entire lifetime be picked to win again. So going to have to go with Seattle.

I’m the last person that didn’t just realize who’s playing this. Yeah, it was just it’s left it open. But I say Seattle, because I think the Patriots have had their day in the sun. It’s,

So okay, well, we covered a lot of ground today. Everything from tariffs, geopolitics fed independence down to some different assets like gold and also banking activity.

Thanks for listening as always. We look forward to speaking with you all again soon.