JPMorgan: Don’t panic! The Greenland crisis may be resolved as early as Davos.

Although the U.S. threats to impose tariffs on some EU countries over the Greenland issue have caused market volatility, JPMorgan remains cautiously optimistic. The bank believes the current chaos will ultimately subside and transform into a “negotiated arrangement,” rather than escalate into a full-scale crisis.

JPMorgan’s international market intelligence team points out that the current market turmoil should be interpreted from the perspective of “the art of the deal.” The tough stance and the noise from the U.S. side are designed to trigger negotiations and create bargaining chips and a sense of urgency. Although the EU has responded by considering retaliatory tariffs and the use of anti-coercion tools, even warning that last year’s U.S.-EU trade agreement could be at risk, this is seen more as a negotiating posture.

JPMorgan analyst Federico Manicardi believes this is not a fundamentally difficult issue to solve. He expects a solution may even surface during the World Economic Forum (WEF) in Davos. Compared to extreme outcomes feared by the market, the bank believes an agreement will likely be reached, rather than a conflict escalation.

Although turbulence caused by “Trumpism” is impacting the market and indicators such as stock pullback risk and emerging market risk appetite have already flashed “orange alerts,” JPMorgan is not pessimistic about market prospects. Analysts at the bank said they would be surprised to see a mid-single-digit market drop because of this, indicating that investors should not panic excessively about the current tariff threats.

"The Art of the Deal" and Prospects for Davos Forum Negotiations

Federico Manicardi elaborated his assessment of the situation in the report. He believes the most likely outcome is a “negotiated arrangement.” This arrangement will expand the U.S. security and economic presence in Greenland, meeting America’s established goals—to strengthen Arctic security posture, enhance defense early-warning capabilities, and access Greenland’s natural resources—while Denmark retains sovereignty.

For other extreme scenarios that worry the market, JPMorgan has ruled them out one by one. The possibility of “selling” Greenland is low, because the U.S. can accomplish those strategic objectives without formal territorial control, and the plan would require dual approval from Denmark and Greenland, which would be very difficult. As for an “invasion,” this is seen as a very low-probability tail risk, extremely unpopular with voters and could trigger NATO’s rapid dissolution, “faster than Arctic ice could melt.”

JPMorgan listed a number of key catalysts for investors to closely monitor. At the upcoming Davos Forum, Trump’s speech scheduled for January 21 may focus on potential candidates for Federal Reserve chair and affordability issues. In addition, the U.S. Supreme Court will hear oral arguments regarding Fed Governor Lisa Cook.

On a macro level, JPMorgan observed a strong start to this year, with sectors and regions taking the lead, and investors expecting an economic restart in 2026 for various reasons. JPMorgan’s trading desk has been long U.K. rates/short U.S. rates in spread trades since September.

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