Original Title: "TACO Reappears: US Stocks Rebound, Crypto Market Remains Sluggish"
Original Source: Deep Tide Techflow
A single sentence changes the market.
On January 21, just as global investors were still digesting the impact of the "Greenland Crisis" and Denmark's pension funds "liquidating US assets," Trump suddenly announced: the cancellation of new tariffs on eight European countries and stated that a "framework" for future agreements regarding Greenland and the entire Arctic region had been reached.
The market immediately switched from panic to euphoria. The Dow Jones surged 1.21% to 49,077 points, the S&P 500 rose 1.16% to 6,875 points, and the Nasdaq increased 1.18% to 23,224 points. All three major indices recovered the losses from the previous day.
TACO Reappears: Panic-Reversal in 24 Hours
This is a typical "TACO" (Trump Announcement Causes Overreaction) market, where a single statement from Trump triggers an excessive market reaction, which is then quickly reversed by another statement.
Just 24 hours earlier, the market was still digesting Trump's threat of a 10% tariff on Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. The EU was preparing a €93 billion countermeasure, and Denmark's pension funds announced they would liquidate US Treasury bonds, leading to a global capital flight from dollar assets. The S&P 500 plummeted 2.06% in a single day, marking the largest drop since October of last year.
However, Trump suddenly softened his stance on the eve of the Davos Economic Forum, announcing the cancellation of the tariff threat. While he still emphasized that "Greenland is crucial to US national security," the wording shifted from "not ruling out the use of force" to "resolving through a framework agreement."
Wall Street's interpretation was simple: this was a carefully designed pressure tactic, the goal had been achieved, and it was time to reel it in.
Goldman Sachs strategists stated, "The market underestimated Trump's negotiation flexibility; the tariff threat was more of a bargaining chip."
Chip Stocks Strongly Rebound, US Treasury Yields Slightly Decline
Individual stock performance confirmed the rebound in risk appetite, with chip stocks being particularly strong.
Nvidia rose nearly 3%, recovering from a more than 4% drop the previous day. The chip giant, which had plummeted due to market panic, quickly rebounded after geopolitical risks eased, showing that institutional confidence in the long-term demand for AI computing power remained unchanged.
Amgen rose nearly 4%, leading the Dow. The index of the seven tech giants increased by 0.98%, with Tesla rising nearly 3% and Google up nearly 2%.
Chinese concept stocks also collectively rebounded, with Baidu leading with an over 8% increase, and Century Internet rising nearly 7%. The Chinese concept stocks, which had suffered heavy losses the previous day, quickly recovered as risk aversion subsided.
The bond market's reaction was relatively restrained. The yield on the 10-year US Treasury bond fell by 1 basis point to 4.28%, slightly retreating from the previous day's high of 4.29%, but still remained in the high range since September of last year.
A more critical signal came from Japan. The yield on Japan's 10-year government bonds fell by 5 basis points to 2.32%, and the 40-year yield dropped by 6 basis points after reaching a historic level of 4%. Japan's Finance Minister, Shunichi Suzuki, urged investors to "remain calm," emphasizing that fiscal policy is "responsible and sustainable."
However, the market did not fully buy into this statement. Analysts at Zheshang Securities pointed out that the brief stabilization of Japanese bonds alleviated global long bond pressures, but this felt more like a rebound from overselling, and the fundamental contradictions regarding fiscal sustainability remained unresolved.
The US dollar index slightly rebounded, but the strength of the euro and Nordic currencies did not completely reverse, indicating that doubts about the dollar's credit were still brewing.
Notably, Denmark's pension fund, AkademikerPension, did not change its decision due to Trump's softened stance; the fund still plans to liquidate all US Treasury bonds by the end of January. This indicates that European institutional investors' doubts about US credit have shifted from an emotional level to structural adjustments.
Gold Prices Surge and Retreat, but Trend Remains Unchanged
Gold prices experienced significant volatility on the 21st. At one point, they broke through $4,800, reaching a historic high, but as Trump canceled the tariff threat, safe-haven funds quickly withdrew, and gold prices retreated to around $4,650.
COMEX gold futures closed lower, but the daily fluctuation exceeded $150, indicating extreme sensitivity in market sentiment.
Despite the short-term pullback, institutional bullish logic on gold in the medium to long term remains unchanged. Aakash Doshi, head of gold strategy at State Street Global Advisors, stated, "The overall trend remains solid, and the possibility of gold prices breaking $5,000 per ounce by 2026 is no longer remote."
The Polish central bank has approved a plan to purchase 150 tons of gold, raising its total reserves to 700 tons. A report from Bank of China International stated that after gold prices soared 67% last year, they have risen another 6% year-to-date, with expectations that demand from central banks and insurance companies will continue to support gold prices.
Crypto Market Continues to Struggle
Bitcoin saw a slight rebound under the boost from the US stock market, but it remained volatile in the $89,000 to $90,000 range, failing to stabilize above the $90,000 mark. Major coins like Ethereum and Solana narrowed their declines, but trading volumes remained light.
The weakness in the crypto market exposes a core issue: when US stocks fall due to geopolitical risks, Bitcoin follows suit; when US stocks rebound due to easing risks, Bitcoin's rebound is weak. This "more drops than rises" pattern makes the narratives of "digital gold" and "risk hedging tool" seem pale.
Data from Coinglass shows that $630 million in cryptocurrency contracts were liquidated within 24 hours, affecting 140,000 people. Although this is far lower than the previous day's scale, the ongoing liquidation wave indicates that market leverage is still being cleaned up.
The flow of funds into Bitcoin ETFs is a clearer signal. The previous day, significant outflows were seen in BlackRock's IBIT and Grayscale's GBTC, indicating that institutional investors' cautious attitude towards crypto assets continues.
Today's Focus
Expectations for Fed rate cuts continue to be revised downwards. Interest rate futures indicate that the market expects a total rate cut of only 47 basis points for the entire year of 2026, down from 53 basis points at the end of last year. Most economists expect the Fed to maintain interest rates this quarter and may not cut rates even before Powell's term ends in May.
Trump's speech at Davos. Although he canceled tariffs on Europe, Trump's statements at Davos are still worth paying attention to. The market needs clearer signals: is the Greenland issue truly settled, or is it just a temporary ceasefire?
Can the Japanese bond market stabilize? Will the technical rebound of Japan's 40-year government bond yield, which first broke through 4%, be sustainable? If Japanese bonds lose control again, the global long bond market will face a new round of shocks.
The financial storm triggered by Greenland has temporarily concluded its first act with Trump's "tactical retreat." However, the deeper contradictions remain unresolved: the US fiscal deficit continues to swell, doubts about the dollar's credit in Europe are fermenting, and the global debt bubble is becoming increasingly fragile in a high-interest-rate environment.
The market switched from panic to optimism in a single day, but the extreme volatility of this sentiment itself is a signal of risk. Behind the TACO market is the ongoing torment of policy uncertainty on the market.
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