“No Military Force in Greenland” Drives Relief Rallies for Stocks, Rates, Greenback: Jan. 21, 2026

President Trump stating that he won’t use military force to control Greenland is sparking a relief rally on Wall Street on the heels of yesterday’s selloff serving the sharpest losses for stocks since October. But despite the head of state wanting to negotiate with transatlantic counterparts, tensions are still quite elevated, as the EU suspended its trade deal with Washington in response to US threats of consequences in the event that the continent’s officials fail to acquiesce. Investors are recovering from the significant volatility, meanwhile, as an increasingly pronounced quarrel has so far been avoided and the commander in chief has dismissed Tuesday’s dip as short-term bumpiness while essentially preparing the Davos crowd for further equity market appreciation and lower interest rates in the near future. Like a swimmer awaiting the sound of the gun before stroking to the other side in hopes of winning the race, traders piled in to shares and Treasuries once the US leader delivered a more conciliatory tone than expected. All major benchmarks and sectors minus the defensive consumer staples category are advancing, albeit, they are well off their highs. The yield curve is plunging in bull-flattening fashion led by duration as yesterday’s avoidance of debt instruments influenced by a “Sell America” theme is reversing, and the greenback is additionally benefiting as a result. Commodities, cryptocurrencies and forecast contracts are also participating in the enthusiasm.

Home Sales Pipeline Disappoints

Pending home sales performed terribly at the end of last year, with December’s 9.3% month-over-month (m/m) subtraction amounting to the sharpest decline since the pandemic. The result was well beneath the median estimate of -0.3% and November’s 3.3% growth. Additionally, the y/y contraction deepened from 2.6% to 3%. From a regional perspective, the Midwest, West, Northeast and South all hurt results with contract signings dropping 14.9%, 13.3%, 11% and 4%. 

Construction Investment Is Mixed

Construction spending declined 0.6% in September but rose 0.5% in October, according to this morning’s Census Bureau release, which was significantly late due to the government shutdown. As of the end of October, overall expenditures dipped 1% year over year (y/y), as the housing segment contracted by 1.2% while nonresidential slipped a more modest 0.9%.

Fundamentals Remain Strong, But Volatility Could Persist

Today’s rebound is motivated by a short-term easing in transatlantic tensions, and fundamentals are supportive of stronger equities and Treasuries from here. Indeed, economic growth and corporate earnings expectations are buoyant, especially as the tailwinds from legislation passed last year is increasingly supportive of consumption, investment and bottom lines in 2026. Fixed income, meanwhile, is poised to rally because inflationary pressures are decelerating sharply, with the last 12 months of cost forces up to yesterday running at 2.3%. Still, geopolitical grapples, fiscal imbalances and/or President Trump himself can weaken stocks and rates alike following years of significant gains, generating a potentially volatile landscape as a result.

International Roundup

UK Inflation Over 12 Months Exceeds Expectations

UK y/y inflation was slightly hotter than expected in December, but price increases relative to November matched expectations. The Consumer Price Index (CPI) was up 0.4% m/m after sinking 0.2% in November. Relative to December 2024, the gauge ascended 3.4%, outpacing the economist consensus estimate of 3.3% and accelerating from 3.2% in November. Price pressures were even hotter when including home occupiers’ expenses as depicted by the CPIH, which climbed 3.6% y/y after a 3.5% November hike. When compared to the eleventh month of the year, it was 0.4%.

The Core CPI, which excludes energy, food, alcohol and tobacco due to their volatile pricing, climbed 0.3% m/m and 3.2% y/y. The monthly metric matched the economist consensus estimate after its 0.2% November plunge. For the y/y result, economists anticipated a 3.3% gain following November’s 3.2% ascent.

Within the m/m CPIH, the following categories and the extent of their changes experienced the largest price increases:

• Transport, 1.3%
• Furniture and household goods, 1.2%
• Alcohol and tobacco, 1%
• Food and non-alcoholic beverages, 0.8%
• Miscellaneous goods and services, 0.3%

Recreation and culture, with a 0.2% drop, was the only category that became less expensive.

UK Producers Catch a Break from Low Energy Costs

Input costs for producers in the UK sank 0.2% m/m in December and grew only 0.8% y/y with lower energy bills accounting for the benign results. Economists anticipated a 0.1% monthly slip after input costs became 0.5% more expensive in November. The y/y pace, furthermore, decelerated from the 1.1% November increase. Among inputs, crude oil prices sank 15.1% y/y. Imports, conversely, were up 1.3% during the 12-month period.

Wholesale prices, nevertheless, were 3.4% higher than during December 2024, matching the y/y result in the preceding period, but were unchanged m/m after a 0.1% elevation in November. In this category, producers fetched 4.3% more for food products.

Canada Gate Prices Retreat

Canadian producers last month sold their items for 0.6% less than during November, a sharp underperformance from the economist consensus expecting a 0.3% uptick. It was also a notable change from November when producers lifted their stickers by 1.1% m/m. The softness extended across most categories, according to Statistics Canada. The southward m/m change was led by energy and petroleum products falling 7.2%. Lumber, furthermore, sank 6% while silver and unwrought silver jumped 25%, contributing to the non-ferrous metals category becoming 7.1% more expensive.  

Gate price gains also decelerated y/y, easing from 5.9% in November to 4.9% last month. Stickers for raw materials, however, expanded 0.5% m/m and 6.4% y/y following 0.6% and 7.2% gains in November. Excluding crude oil, inflation as measured by the Raw Materials Price Index reached 21.3% y/y with precious metals, cattle and calves contributing to the change.