Trump takes military action off the table (for the nonce):
Source: TradingEconomics, accessed 11am CT on 1/21/2026.
The VIX has declined, although currently rebounding. The 10 year bond yield is still way up relative to pre-weekend.
EPU and trade policy uncertainty are up (data through the 20th):
Figure 1: EPU (Baker, Bloom and Davis) (blue, left scale), and Trade Policy Uncertainty (Caldara et al.) (red, right scale). Source: Policyuncertainty.com and Trade Policy Uncertainty, accessed 1/21/2025.
Keep in mind that Trump didn’t really rule out military action.
He effectively said “I have a gun in my pocket. I won’t have to use the gun in my pocket because you are going to give me your wallet.” What happens if you refuse is implied.
So the bond market is betting on whether Europe will give up their wallet or not. If they don’t, expect violence.