How Assertive Foreign Policy Shifted Geopolitical Risk Above Company Profits

The start of 2026 has brought a fundamental shift in what investors view as the primary threat to equity markets. Rather than economic weakness or disappointing corporate results, geopolitical tensions emerging from the White House’s assertive foreign policy moves have become the dominant driver of market sentiment and asset valuations.

January opened with a cascade of international events that sent shockwaves through financial markets. The U.S. dollar fell to its lowest level in four years, gold surged past $5,000 per ounce, copper reached fresh highs, oil climbed to its strongest level in six months, and long-term Treasury bonds experienced significant selling pressure. Despite these turbulent conditions across multiple asset classes, equities managed to post positive returns for the month—a development that masked underlying uncertainty about policy direction.

January’s Turbulent Markets Reflect Growing Policy Concerns

Todd Morgan, chairman of Bel Air Investment Advisors, captured the shifting investor mindset succinctly: “There’s been a noticeable shift in perception of the U.S. compared to last year. Concerns are building around presidential actions, questions about potential tariffs, diplomatic relationships, and major military deployments globally. I can’t recall anything comparable in decades—and it’s unfolding right now.”

The source of this anxiety is clear. President Trump initiated 2026 with military intervention in Venezuela, leading to the capture of former leader Nicolas Maduro. He subsequently threatened new tariffs on European nations over opposition to Greenland initiatives and elevated tensions with Iran through fresh warnings about potential action. Even the nomination of Kevin Warsh as Federal Reserve chair—typically a market-friendly development—failed to calm nervous investors. This pattern suggests that policy decisions and geopolitical moves have begun to outweigh traditional positive catalysts like accommodative central bank leadership.

Dollar Assets Lose Safe-Haven Status Amid Policy Uncertainty

What distinguishes the current period from previous geopolitical episodes is the emergence of friction with traditional U.S. allies, including Europe and Canada. This has cast serious doubt on the safe-haven characteristics of dollar-denominated assets, particularly long-term U.S. Treasury bonds, which represent a $30 trillion market globally.

Tony Rodriguez, head of fixed-income strategy at Nuveen, explained the implications: “Both domestic and international investors are reassessing how dollar assets should fit into their portfolios due to elevated policy uncertainty. Volatility in U.S. policy spiked dramatically in January, requiring investors to demand a higher risk premium to justify holding American investments.”

This revaluation reflects something rarely seen before—international investors questioning whether U.S. Treasuries and dollar holdings deserve their traditional safe-haven designation when geopolitical risks emanate from U.S. foreign policy itself. The calculation has fundamentally changed.

Strong Earnings Overshadowed by Assertive White House Moves

Stephen Dover, chief market strategist at the Franklin Templeton Institute, acknowledged that “markets have historically shown poor performance in incorporating geopolitical risks into asset prices.” Yet he noted an emerging response: investors are increasingly seeking strategies to navigate turbulent conditions based on anticipated geopolitical developments, with central banks notably increasing gold reserves.

On the positive side, corporate fundamentals remain resilient. By early February, approximately one-third of S&P 500 companies had reported fourth-quarter 2025 results, with 75% exceeding analyst earnings estimates—slightly below the five-year average of 78% and the ten-year average of 76%, per FactSet data. This solid performance should theoretically provide support for equity valuations.

However, Shannon Saccocia, chief investment officer of wealth at Neuberger Berman, pointed to a troubling disconnect: “This has proven to be a challenging environment. Normally, robust earnings would help offset concerns about geopolitical developments or policy shifts, but that protective dynamic isn’t working this time.”

Market Signals Suggest Repricing of Risk Premium

Despite the geopolitical headwinds, stocks opened the week on an upswing, with the S&P 500 up 0.5%, the Dow Jones Industrial Average advancing 0.7%, and the Nasdaq Composite gaining nearly 0.8%, based on FactSet data. However, this modest strength masks deeper uncertainty about whether traditional valuation supports will hold.

Investors will continue monitoring technology sector earnings throughout the week, with results from Palantir Technologies, Advanced Micro Devices, and Qualcomm scheduled to be released. Alphabet (Google’s parent company) will report on Wednesday, followed by Amazon.com on Thursday. These announcements will test whether tech strength can provide the reassurance that broader corporate earnings currently lack.

Complicating the outlook further is the partial U.S. government shutdown that entered its third day as Congress negotiated funding proposals. Any delay in resolving the funding gap by Tuesday could disrupt key economic data releases, most notably the January employment report originally scheduled for Friday—a report that could significantly influence market expectations for interest rates and economic momentum heading into spring.

The fundamental tension remains: investors face a choice between trusting that assertive foreign policy signals will eventually resolve without economic damage, or increasingly demanding compensation in the form of higher valuations or lower prices for holding assets through this period of geopolitical uncertainty.