Just yesterday, we wrote that "the latest [stock market] pullback won't last long," partly because we "expect the Greenland issue will be resolved." It seemed resolved this afternoon when President Donald Trump said that he and NATO Secretary General Mark Rutte "formed the framework of a future deal with respect to Greenland." The President told CNBC that "we have a concept of a deal" with the Arctic island. So he called off the threatened tariffs on eight European nations that were conducting a military exercise in Greenland to protest Trump's plans to take it "one way or another."
Trump explicitly stated today, "I don't want to use force. I won't use force." When later asked by a reporter about the Danish rejection of his framework a few hours later, Trump responded dismissively, "If he [the Danish prime minister] wants to tell me, he can tell me that to my face."
Meanwhile, the US economy continues to demonstrate its resilience. The Atlanta Fed's GDPNow tracking model today increased its estimate for Q4-2025 real GDP growth from 5.3% to 5.4% saar (chart). The model now puts real consumer spending growth at 3.2%, up from 3.1%, and real capital spending growth at 6.4%, up from 5.1%.
The Redbook Retail Sales Index rose solidly by 5.5% y/y through the week of January 16. The strength in retail sales during December and January is confirmed by the record-high forward revenues of the S&P 500 Retail Composite industry during the week of January 20, 2026 (chart).
