The episode has revived discussion around the so-called “Sell America” trade, which gained popularity after the announcement of “Liberation Day” tariffs last April. This time, however, Reuters reported that investors seemed more reluctant to jump in and buy the dip, signaling a shift in market psychology as geopolitical risks resurface.Market participants told Reuters that the latest sell-off bore similarities to last year’s pattern, when stocks peaked early in the year before correcting sharply amid escalating tariff news. While Trump has previously shown flexibility on trade policy when markets weaken significantly, investors remain concerned that resolving tensions over Greenland could take longer and require greater volatility before clarity emerges.
The sell-off was particularly troubling because it spanned multiple asset classes at the same time. Reuters highlighted that the unusual combination of falling stocks, a weaker dollar and rising bond yields has forced investors to reassess some long-held assumptions about the market’s resilience and diversification.
On Wednesday, Trump ruled out the use of force in pursuing control of Greenland, while reiterating that no other country could secure Danish territory. Following these comments, US stocks and the dollar recovered some of the previous session’s losses, Reuters said.
Despite the recovery, concerns remain high. The S&P 500’s 2.1% decline on Tuesday marked its steepest one-day decline in more than three months, with dip buyers noticeably absent. After three straight years of double-digit gains, valuations remain high, leaving stocks vulnerable to unfavorable headlines. Still, few investors are willing to abandon U.S. stocks completely, Reuters reports. Many view diversification outside the US as sensible at the margins, while continuing to view US companies as fundamentally strong and highly profitable.
Corporate profit expectations also remain supportive. According to LSEG IBES data cited by Reuters, S&P 500 earnings are expected to rise 13.3% in 2025, followed by a further 15.5% increase in 2026 as fourth-quarter reporting gets underway.
That said, a continued decline in foreign investors could weigh on market performance. Reduced foreign inflows into US equities could dampen returns, even as underlying business fundamentals remain solid.
For the time being, most investors appear to be taking a wait-and-see approach. Reuters reported that while risks are clearly increasing, many believe markets have not yet reached a point that would warrant a major shift in positioning.
Another factor tempering aggressive selling is the belief that Trump will ultimately negotiate from his initial position. Reuters noted that traders remain wary of entering fully bearish positions because of Trump’s history of escalating threats before retreating, a dynamic that has repeatedly shaped market reactions.
As uncertainty persists, investors are bracing for further volatility, weighing the risk of geopolitical escalation against the possibility that a sharp downturn could once again attract bargain hunters.
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