TORONTO – Stock markets in Canada and the U.S. bounced back after U.S. President Donald Trump said he wouldn’t use military force to take Greenland and backtracked on tariffs he had threatened on several European countries over the issue.
Trump also said he reached a framework of a deal about Greenland, an island he’s recently coveted.
“I think that provided some positive sentiment to the market after selling off yesterday,” said Theresa Shutt, chief investment officer at Harbourfront Wealth Management.
The S&P/TSX composite index was up 101.25 points at 32,851.53.
In New York, the Dow Jones industrial average was up 588.64 points at 49,077.23. The S&P 500 index was up 78.76 points at 6,875.62, while the Nasdaq composite was up 270.50 points at 23,224.82.
Trump has a history of making big threats that send financial markets sliding, only to pull back later and reach deals that are seen as less bad for the economy or for inflation than his initial suggestion. The pattern has given rise to the “TACO” acronym, suggesting “Trump Always Chickens Out” if financial markets react strongly enough.
Shutt said the “TACO trade is still clearly very much in play.”
“There is a trend or certainly a pattern where President Trump is making rather aggressive statements and announcements as part of his bargaining tactics or negotiating tactics to anchor pretty extreme offers and positions to basically put the opposition on their back feet,” she said.
“And then he tends to soften those positions and pull back.”
While markets experienced some volatility amid the most recent bout of trade tensions, Shutt said many investors don’t go “all in on the down trade” given the potential for Trump to change his mind.
Trump himself acknowledged how his desire for Greenland led to Tuesday’s drop in the U.S. stock market, but he called it “peanuts compared to what it’s gone up” in the first year of his second term and said it would go up further in the future.
Meanwhile, the S&P/TSX composite index benefited from gains in energy stocks on Wednesday.
Shutt said that although the energy sector has been under pressure lately, it still has strong support due to AI capex.
In the U.S. market, United Airlines climbed 2.2 per cent after reporting a better profit for the final three months of 2025 than analysts expected. CEO Scott Kirby said that the airline’s strong momentum in revenue is continuing into 2026.
“Obviously, a strong showing there with record earnings this year, in terms of what they think they’re going to project out, strong travel demand, the implementation of these premium seats, and obviously business travel,” Shutt said of the company.
She said the results from United Airlines reflect the K-shaped economy, where there is still demand from wealthy consumers for luxury items like travel.
The Canadian dollar traded for 72.39 cents US compared with 72.31 cents US on Tuesday.
The March crude oil contract was up 26 cents US at US$60.62 per barrel.
The February gold contract was up US$71.70 at US$4,837.50 an ounce.
This report by The Canadian Press was first published Jan. 21, 2026.
— With files from The Associated Press.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
