Global geopolitical risks are increasing

At the time of writing, the United States and European NATO allies are at odds over President Trump's demand to take over Greenland from Denmark. This constitutes a direct threat from one NATO ally (the US) to another (Denmark). In retaliation, President Trump imposed 10% tariffs on eight European NATO countries from 1 February, increasing them to 25% on 1 June. Four of these countries are Nordic, and six belong to the EU. These actions jeopardise the US-EU trade agreement, finalised in summer 2025. Higher tariffs between the United States and the European Union could lead to higher inflation and interest rates in both regions.

The United States accounts for over half of NATO's military spending. European members have relied on the United States for protection, primarily against threats from Russia. Following his election as president in 2016 and again in 2020, Trump pressured other NATO members to increase their military spending from 2% to 5% of their GDP. On June 25, 2025, the other NATO members finally agreed to the higher requirement of 5% by 2035.

Russia's invasion of Ukraine in 2022, the US's demand that European states increase their defence budgets as well as the US's military attack on Venezuela and threat to take over Greenland have all significantly increased the value of European defence stocks. When the United States seeks to acquire territory from a NATO ally, Denmark, Europe's conclusion is that they must develop their own military capabilities, which, until now, have been mainly provided by the United States.

In recent years, defence stocks have become a popular topic among brokers and fund managers. Examples of European defence stocks include Rheinmetall, Saab, BAE Systems, the Renk Group, Airbus SE and Safran SA. Since Russia invaded Ukraine on February 24, 2022, Saab AB's market capitalisation has grown from nearly SEK 29 billion to around SEK 400 billion (see graph below). This increase  stock price is also due to the expectations that Europe will increase its purchases from European defence companies and decrease its purchases from American companies.

The question of how these sharply increased European military budgets will be financed over the next decade  has received little discussion. At a time when Europe accounts for about 25% of the global GDP, this question is important, as is the question of their potential impact on future market interest rates. There are three ways to finance such increased spending: One option is to raise taxes. Another option is to reduce spending in other areas, such as healthcare and education. The third option, which is the most politically expedient way to avoid angering voters, is for European states to increase borrowing to finance defence investments. However, the average national debt of EU countries is already over 80% of GDP, and the UK's is over 90%. Large European countries, such as France, Italy, and Spain, have a national debt exceeding 100% of their annual GDP. If EU countries were to increase defense spending from 2% to 5% of GDP and choose to borrow, their debt would rise from 80% to 110% of GDP within ten years. This would also likely cause European countries’ creditworthiness to decline, resulting in higher market interest rates.

A solution to the Greenland crisis could prompt a recovery in the stock market. For instance, in an upcoming verdict, the US Supreme Court could reject some or all of Trump's previous tariff proposals in an upcoming verdict. However, this is not guaranteed. The long-term commitment to arming Europe's defense forces will put upward pressure on market interest rates for many years to come.

As of January 16, 2026, 7% of S&P 500 companies had reported their Q4 2025 results. According to Earnings Insight, 79% of those companies reported a positive earnings per share (EPS) surprise, while 67% reported a positive revenue surprise. So far, the average EPS surprise for S&P 500 companies so far is 5.8%, down from 6.6% in Q3 2025. In the financial sector, where seven major banks reported last week, 69% of companies reported a positive EPS surprise, averaging 0.5%.

US companies Johnson & Johnson, Charles Schwab and Prologis are scheduled to release their Q4 2025 reports on Wednesday, January 21. The Swedish company Avanza is also expected to report its quarterly results. The day's macroeconomic news will begin with the release of the UK's consumer and producer price indices for December, as well as the CBI's industrial trends report for January. The IEA will also release a monthly oil report. The US will release data on pending home sales for December and construction spending for October.

On Thursday, January 22, the following US companies are scheduled to release their quarterly reports: Intel, GE Aerospace, Procter & Gamble, Intuitive Surgical and Abbott Laboratories. The same day, the Swedish companies EQT, Essity and Investor, the Danish company Tryg, and the French company LVMH will also report their Q4 2025 results.The day's macroeconomic news begins with South Korea's Q4 GDP and December trade balance. We will also receive a confidence indicator from Eurozone households for January (see the graph below) and an interest rate announcement from Norges Bank. From the US, we will receive weekly jobless claims, Q3 GDP, and personal consumption and inflation (PCE) figures for November, as well as weekly oil inventory data from the Department of Energy and the Kansas Fed Index for January.

On Friday January 23, the Swedish company Ericsson is scheduled to report its Q4 2025 results. Macro news will be dominated by the release of January's Purchasing Managers' Index (PMI) data from Japan, India, France, Germany, the Eurozone, the UK and the US. In Japan, the December Consumer Price Index and a rate announcement from the Bank of Japan are due to be released. In Europe, retail sales data for December from the UK and a January confidence indicator from the French industry are expected. In the US, the January Michigan Index is scheduled.

Renewed trade and tariff tensions between President Trump and the EU have pushed the S&P 500 down, with it now trading at the 6,830-support level provided by the MA50. The next downside level is around 6,745. The bearish rising-wedge formation has broken down, and the pattern suggests that levels around 6,600 could be reached. In this situation, buying the dip in the short term is only for the bravest of investors. It is also worth noting that the 10-year US Treasury yield has started to rise relatively quickly. Continued increases in US yields are unlikely to benefit equities. 

The NASDAQ-100 is also trading at the 25,150-support level. The next level to watch is the MA100, currently at 25,891, with a break below this level potentially leading to a fall to around 24,000. If yields continue to increase, the NASDAQ-100 is likely to be affected more negatively than the S&P 500. 

The DAX has fallen sharply and is currently trading below the 20-day moving average, but above the support level of around 24,500. If this level is broken, the next target could be 24,000. 

Following a strong rally, the OMXS30 has returned to the upward-sloping trend channel. The MA20, which is currently at 2,918, serves as the first level of support, closely followed by 2,900 and the floor of the rising trend channel. 

EMA 9: 9-day Exponential Moving Average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence in which each successive number is the sum of the two previous numbers.

MA20: 20-day Moving Average

MA50: 50-day Moving Average

MA100: 100-day Moving Average

MA200: 200-day Moving Average

MACD: Moving Average Convergence Divergence