Trump’s Davos Speech Sets the Tone as Markets Brace for Trade and Geopolitical Risks

Investor sentiment remains fragile as markets enter the session shaped by rising trade risks and renewed geopolitical tension. The focus today is firmly on U.S. President Donald Trump, who is scheduled to speak at the World Economic Forum in Davos.

According to media reports, Trump’s remarks are expected to centre on Greenland and broader geopolitical issues. Any signals pointing toward new tariffs on European countries could trigger sharp volatility spikes, particularly across trade-sensitive sectors.

At the same time, the rally in gold continues. The precious metal gained another 2% earlier today, extending its advance as investors hedge against geopolitical and trade uncertainty. A softer-than-expected tone from Trump, however, could prompt a rapid round of profit-taking in gold.

Legal and policy backdrop adds to uncertainty

Adding to the day’s event risk, the U.S. Supreme Court is set to review the legality of the dismissal of Federal Reserve Governor Lisa Cook later this week. While this legal case is unlikely to alter the medium-term outlook for interest rates, it increases the probability of short-term market dislocations.

Futures hold steady near key levels

U.S. equity futures are showing a modestly positive bias, though price action remains constrained. The overall risk balance is neutral, with volatility holding at moderate levels.

From a technical perspective, the S&P 500 is expected to trade within a broad range between 6,720 and 6,860. Futures on the S&P 500 and Nasdaq continue to consolidate as investors await clarity from Davos.

What happened in the previous session

During the prior trading day, both the S&P 500 and Nasdaq closed lower. The S&P 500 saw an impulsive downside move but managed to stabilise near the 6,800 level. The Nasdaq fell out of its medium-term ascending channel and ended the session around 25,000.

Market action today

In today’s session, S&P 500 and Nasdaq futures are moving sideways. S&P futures are hovering near the lower boundary of a wide ascending channel, holding above 6,800. Nasdaq futures have formed a short-term downward-sloping channel while maintaining support above 25,000.

Key drivers to watch

• Trump’s Davos speech, with a focus on geopolitics and tariffs
• Equity markets posting their weakest session since October following tariff threats
• Natural gas prices surging amid extreme weather risks and shifting supply-demand dynamics
• Gold reaching a new all-time high above $4,850 per ounce on rising geopolitical tension
• U.S. Treasury auction of 20-year bonds later today

Sector performance

Cyclical sectors moved lower alongside the broader market, with XLY, ITA, XLF and XLI leading the declines.

Growth-oriented sectors also finished in negative territory. The weakest performers included MJ, SKYY and XLK, while IBB ended the session in positive territory.

Defensive sectors showed mostly negative performance. XLU led the losses, while XLP managed to close slightly higher.

Intermarket snapshot

Oil continues to trade within a local upward channel, holding near the $60 level. Treasury yields, after a sharp upward move, have pulled back modestly toward 4.27%.

The VIX tested its downward trendline from April and is now retreating toward the 19 level.

Gold has broken above the upper boundary of its local ascending channel, briefly touching $4,890 per ounce, a new historic high.

Technical analysis by: Lucas Grant, Senior Technical Analyst at Finmire.