It Looked Like a Stock, Bond and Dollar Fire Sale Today!

“This is sell America,” says today’s top headline. “U.S. dollar, Treasury prices tumble and gold spikes as globe flees U.S. assets.”

The Dow plunged 870 points, at one point reaching more than 900 down shortly before close.

Particularly noted in the final revised headline was that this was the “worst day since October on Trump tariff threat over Greenland,” adding in the article summary, “The ‘sell America’ trade is in full swing Tuesday morning.”

Of course, Trump makes these massive economy-changing threats then quickly chickens out when he sees the carnage his half-baked, anger-driven outbursts cause. While he claims that is the art of the deal, the art is going to become very expensive for America as it continually stirs turmoil this year.

Today’s kind of move, when it was short-lived, happened so often last year that market analysts started calling moves like this (when the market settled down the next day upon further digestion) the TACO trade—stock traders betting that “Trump Always Chickens Out.” In the TACO trade, traders bought stocks the morning after prices plunged due to Trump’s tariff announcements then sold them after prices rose back up when the tariffs were delayed or reduced a day or a week later.

Investors made a lot of money betting on TACOs. So, who knows if this is the start of a continued fall this time or just another TACO trade forming? However, today’s action looked more deeply troubled than the market has looked since last spring’s polar bear plunge. It looks worse than it did going into last spring.

European dollar denunciation

Bond volatility also turned brutal today with yields on the US 10YR Treasury breaking above a tight wedge pattern, which leans toward a forecast of even higher interest to come on the US debt. It also helped carry the dollar toward its lowest international value in two weeks.

The Bloomberg Dollar Spot Index slipped to its weakest level since Jan. 6 and was on track for its worst two-day stretch in about a month. The euro rose to a more than two-week high while the Swiss franc led gains in the Group-of-10 currencies….

Trump has threatened to impose tariffs on European countries that oppose his plans to take control of Greenland, sparking fears of a major trade confrontation. The US president has also floated 200% tariffs on French wine and champagne after President Emmanuel Macron rejected an invitation to join his latest peace initiative.

Trump now throws massive, maddening tariffs around for everything he doesn’t like—every slight that he feels. Yes, not to be outdone by his own tirade yesterday, the president got all wound up again today because Macron would not join his coalition of the unwilling at Davos to form a “Board of Peace,” comprising about ten nations with Trump as its chairman.

While Trump has said the purpose of the board is to govern the nearly destroyed Gaza Strip (aptly named as he redevelops it into the Vegas Strip of the Middle East), Macron said the language of the agreement clearly left a wide open door for this group of ten leaders (to include Russia) to rule the world by negotiating and governing disputes and peace agreements/treaties everywhere as what some speculated looked like a back-door replacement to the UN, which was originally formed for such purposes.

The dollar’s decline was also booted along its way by today’s decision of a Danish pension fund to ditch a hundred-million worth of US Treasuries, claiming their decision was because the US debt is becoming unstable (as is its president who has piled onto the debt with his new massive military budget (essential for global control) built into Big Bloated Bill.

The US currency extended losses on Tuesday after a Danish pension fund that had about $100 million in Treasuries at the end of 2025 said the US is no longer “good credit” and committed to selling the bonds. Earlier in the day, Treasury Secretary Scott Bessent had urged calm and dismissed the idea that Europe could dump Treasuries and other US assets.

Short-dated volatility firmed as last year’s pattern of a weaker dollar … re-emerged. Euro options volume rose, reflecting both demand for protection and a renewed desire to position for a near-term move higher, in what amounts to the sharpest bullish repricing for the common currency since early August.

So, dollar down, euro euphoric. Thank you, Trump. You know the move is scaring people in the Trump Administration a little when they have to pull out the US Treasury Secretary to try to calm down markets. When the Treasury Secretary says, “Don’t worry about Europe dumping US Treasuries and other US assets,” the correct response is not, “Oh, everything is fine then;” it’s, “What!? Europe is dumping Treasuries and other US assets?”

“Markets have reacted but there’s clearly room for bigger moves if the rhetoric increases further,” Jim Reid, global head of macro research and thematic strategy at Deutsche Bank AG in London, wrote in a note.

While the stock market largely ignored Trump’s tariffs last year, after the initial tumult they caused last spring, it turns out tariff temper tantrums from the Oval Office, just when investors had beguiled themselves into thinking things couldn’t get any worse, are a little more unsettling.

The CBOE Volatility Index (VIX), often hailed as the stock market’s “fear gauge,” surged past the critical 20.00 threshold on January 20, 2026, marking a significant shift in investor sentiment as the new year’s optimism collided with a wall of geopolitical and fundamental headwinds. Closing at 20.69—a nearly 28% jump in a single session—the index signaled a definitive end to the low-volatility environment that characterized the final quarter of 2025. This sudden spike was catalyzed by a stunning ultimatum from the White House regarding European trade and a wave of defensive earnings revisions that forced analysts to reconsider the “soft landing” narrative.

The immediate implications of this volatility are profound, as the cost of portfolio protection has skyrocketed and the traditional “risk-on” appetite for tech and growth stocks has abruptly soured. With the VIX trading above its historical average, market participants are bracing for a period of heightened turbulence. The intersection of a major transatlantic trade dispute and a lack of reliable economic data following the recent record-breaking government shutdown has left institutional investors flying blind, leading to a “sell first, ask questions later” mentality that wiped nearly 2% off the Nasdaq in hours….

The primary catalyst for the mid-January market fracture was the announcement of the "Greenland Tariff" on January 17, 2026….

Compounding the trade uncertainty is a brewing institutional crisis at the Federal Reserve. As Jerome Powell’s term as Chair nears its May 2026 expiration, public friction between the White House and the central bank has reached a fever pitch. A Department of Justice investigation into Powell regarding administrative building renovations was interpreted by many on Wall Street as a political maneuver to compromise the Fed’s independence and force lower interest rates.

You could see this coming

So far, things are looking spot-on for the top prediction I gave in a Deeper Dive earlier this month for paying subscribers:

I think we are only beginning to see how Trump is the master of chaos and just starting to see the COSTS that chaos and a severe lack of moral values at the top will have for businesses and society. Trump serves no higher calling than himself. I’ll go out on a limb here and predict that many who do not yet see that will start to see it pretty clearly in 2026.

We now even see outrage starting to grow and spread in very obvious ways within MAGA. Many of Trump’s BIGGEST and most influential supporters have turned against him. Granted, many others stay with him, but the divide has become abruptly apparent within less than one year of him being in office, especially as Trump’s lack of any moral code that backs and informs his ideology has become clear under the Epstain Files. That has been a line of demarcation for many in MAGA where the truth about this man’s character starts to emerge for them. (As I said above, Trump’s only ideology is what serves to aggrandize him.)

I predict 2026 will be a year when the chaos gets far worse as MAGA breaks down, and Democrats find some traction against Trump, breaking down his armlock over congress. Of course, the continuing breakdown of the economy under Trump Tariffs, which was not doing so well under Biden to begin with, will add to the social chaos.

And there we go!

The article I quoted in the subsection before this one goes on to say,

The market’s ability to digest these shocks has been severely hampered by what analysts are calling the “Data Void.” Following a record 43-day government shutdown that paralyzed federal agencies in late 2025, essential economic indicators—such as GDP growth, labor statistics, and PCE inflation data—have been delayed or presented with significant caveats. This lack of visibility into the true health of the U.S. economy has left the market overly sensitive to headlines. Without the steadying hand of official data, the vacuum has been filled by speculation, driving the VIX to its highest level in months.

That also validates a prediction I made in my Deeper Dive for stocks:

The flatlining of the past few months and the broadly falling economy along with the continuance of tariffs makes the stock market more likely to fall hard than we were at the start of 2025….

However, the market is not going to get to see how bad the economy is because inflation is so poorly reported now, and the administration so set on hiding the facts about jobs (to the point of firing department heads who report anything the president doesn’t want to hear); and those seriously under-reported inflation numbers mean seriously over-reported GDP growth because the same government is calculating the deflator for GDP with understaffed departments and far below-average data collection, which makes the valuation of the market relative to GDP not looks as bad as it should. We are living in a cloud of lies.

Still, I think the reality of the economy, such as I keep reporting anecdotally from consumer and business surveys, is going to keep bashing investors’ heads in until they get the point. I’m reluctant to make a market prediction on this most relentlessly euphoric of all markets because last year’s proved only barely accurate enough to call it a score; but … I have to say, everything is poised even more precariously than it was at the start of 2025.

Because investors are increasingly realizing they are operating in a void of facts, they are more reactionary to things like surprise tariffs than they were following the market’s original 20% plunge last Spring when Trump first started throwing tariffs all around like a mad baby tossing toys out of his crib. The price for his endlessly changing tariffs and mercurial temperament as the guiding light of policy is going to become very real this year. Very real.

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