Bond vigilantes are prowling the markets. There’s a question over whether the activist fixed-income investors have Japan or U.S. government debt in their sights but ultimately it might not matter if the market action forces the Trump administration to retreat.
Markets got an unwelcome triple whammy as equities, Treasuries, and the dollar all sold off Tuesday. The most consequential was the drop in prices of U.S. government debt, suggesting President Donald Trump’s threat of tariffs against fellow NATO members has reawakened the “sell America” trade. The yield on the 30-year Treasury hit its highest level since September and hovered near the psychologically important 5% level.
The bond market action suggests Europe has some cards to play when it comes to pushing back against Trump’s desire to acquire Greenland. A Denmark-based pension fund enjoyed a rare moment in the spotlight when it said it was going to sell its holdings of U.S. Treasuries, while Deutsche Bank analysts noted European countries own $8 trillion of U.S. bonds and equities that could be
weaponized in a trade war.
Soaring yields have reined in the Trump administration before. The president noted the bond market reaction had been “very tricky” when he said he would scale back some tariffs in April last year. But Treasury Secretary Scott Bessent insisted Wednesday that the Treasuries selloff had more to do with moves in the Japanese bond market, where investors are fretting about increased government spending and tax-cut pledges.
Bessent might be right about the immediate trigger, but that doesn’t mean the White House can ignore market signals about U.S. government debt falling out of favor as a haven asset amid worries
about overreach. James Carville, advisor to President Bill Clinton, notably once said he wants to be reincarnated as the bond market, because it can intimidate everyone. That’s true even for American presidents.
—Adam Clark
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Trump Addresses Davos Today. Affordability Is on the Agenda.
Americans say the economy and cost of living are the most important
issues they face, a CNN poll recently said. President Donald Trump is expected to outline affordability policies today in Davos even as he has openly questioned whether such concerns are legitimate or a product of bad messaging.
- Trump’s frustration with Americans’ perceptions of the economy is similar to sentiments White House officials expressed during President Joe Biden’s administration. They noted the U.S. economy was doing better than its global peers even as many voters believed the U.S. was in a recession.
- Trump’s speech at the annual gathering of world leaders in Switzerland this morning comes just days after Trump threatened to impose tariffs on goods from eight European countries until the U.S. secures an agreement to purchase Greenland from Denmark, which has created a controversy of its own.
- Though Trump will likely address his Greenland ambitions in the speech, White House officials say it is intended to focus on U.S. affordability and the economy. Trump will present plans to bring down housing costs and emphasize that the U.S. and Europe must leave behind economic stagnation, they said.
- Trump and other GOP leaders are trying to turn around voters’ perceptions that Republicans aren’t doing enough to bring down prices. A CNN poll this month found that 61% of Americans disapprove of Trump’s economic performance, the worst mark that the president has registered in either of his two terms.
What’s Next: Many of the proposals Trump has already made would require Congress to pass legislation, which is a tall order in an election year. What’s more, many of Trump’s other ideas, such as the Greenland-related tariffs, could raise prices.
—Joe Light
Is the AI Honeymoon Over? Mag 7 Stocks Reflect Fear.
Stocks sold off across the board on Tuesday, with geopolitical uncertainty over Europe and Greenland rekindling the “Sell America” trade and hitting tech shares hard. The tech-heavy Nasdaq ended the session down for the year so far, and investors fled even safer assets. The dollar fell, and Treasury yields surged.
- The Magnificent Seven stocks especially felt the fallout as investors dumped riskier assets. Tuesday was the sixth time in the past three months that all of the Mag 7 tech stocks have dropped in a single trading session, according to Dow Jones Market Data. High valuations make them vulnerable to sharp declines.
- Nvidia stock fell more than 4%. In a research note titled “the honeymoon is over,” Deutsche Bank analysts Adrian Cox and Stefan Abrudan argued that this year could be make or break for companies developing artificial intelligence models without large existing businesses to fund the expense.
- The Deutsche analysts said ChatGPT developer OpenAI may be most at risk because it hasn’t found a model to cover its reported cash burn of $9 billion last year and possibly $17 billion this year. OpenAI is introducing ads to the unpaid version of ChatGPT and the lowest paid tier.
- Nvidia and OpenAI’s fates are entwined. Nvidia has agreed to invest up to $100 billion in OpenAI. Meanwhile, OpenAI has agreed to lease up to five million of Nvidia’s chips at a value of $350 billion according to reporting in October by The Wall Street Journal.
What’s Next: The Deutsche Bank analysts note that OpenAI has committed to spending $1.4 trillion on data centers and related
infrastructure in the next few years, saying the pressure will increase as it gets closer to an initial public offering by 2027.
—Karishma Vanjani and Adam Clark
Netflix’s Softer Margin Guidance Overshadows Earnings Beat
Netflix issued softer-than-expected 2026 margin guidance, which overshadowed its higher than expected fourth-quarter earnings and revenue. Its estimates include about $275 million in expenses
related to its now all-cash bid to acquire Warner Bros. Discovery’s streaming and studio assets.
- Netflix forecasts full-year 2026 revenue of
$50.7 billion to $51.7 billion. At the midpoint of that range, it would be above what Wall Street expects. But its 31.5% operating margin falls short of expectations, which Gabelli Funds portfolio manager John Belton called a “big disappointment.”
- Belton believe
