Written by:
Alex Chappell
Investment Manager at Amber River DB Wood
Do we run for cover or do we wait for the ice to melt?
“What I’m asking for is a piece of ice” said Trump as he stood up at his lectern in Davos. Referring of course to Greenland, the latest geopolitical hotspot to hit the headlines. With a population of just 57,000, in people terms, it isn’t much bigger than a decent size town but is one that carries significant strategic positioning and energy resources.
Trump would call it the art of the deal, where he threatens significant action in order to get what he really wants, which is likely an agreement to enhance the US’s defence footprint amongst other things. But add it to the list of Iran, Venezuela, Palestine, China and not to mention Russia-Ukraine, and it is no wonder the world order feels about as uncertain as it ever has. Geopolitical impact is near impossible to factor in terms of running an investment portfolio. Do we run for cover or do we wait for the ice to melt?
At the same time as raising geopolitical tensions, the US administration continues to put significant pressure on the Federal Reserve to cut US interest rates. Central Bank chairmen are notoriously structured in their communications, so to see Jerome Powell (sitting Chairman of the Federal Reserve and therefore one of the most important policy makers in the world) send out a video just over a week ago that accused the President of political intimidation, was quite something.
More important to markets is that economic growth on a global level remains solid with inflation under control
President Trump is currently interviewing candidates to replace Jerome Powell in May, a process which must be a little like a real-life version of the TV show, the Traitors. I now have an image of six policy makers sat across a round table, Trump as Claudia Winkleman (but with a red tie), letting them fight it out to see who is truly committed to cutting interest rates, and who is just saying the right thing to win.
The market implication here is that the Federal Reserve (the Fed) are an independent body, responsible for setting interest rate policy but with the aim of achieving stability in the economy and the dollar. If the Fed were to bow to political pressure and not take an independent view on what was right for those variables, confidence in the US monetary system would be severely damaged.
Trump’s view is that cutting interest rates will stimulate an economic growth spurt from which he has a better chance of winning the midterm elections in November. Similarly, by creating a lot of noise around taking Greenland, he will increase his vote count.
Largely though such developments are just that… noise. We should not be flippant or dismissive of them, but equally a full invasion of Greenland, or a new Fed Chair drastically cutting interest rates at their first chance, are both highly unlikely to put it mildly. More important to markets is that economic growth on a global level remains solid with inflation under control. Economic data so far this year remains supportive, and though we are very early into 2026, portfolio returns have so far continued their form from 2025. Far too early of course to put the champagne on ice…
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