Prepare, Don’t Predict: Greenland and US Strategic Ambitions – A Case Study in Preparation

The US administration’s interest in Greenland has intensified, driven by strategic calculations. Greenland’s location and resources are uniquely valuable to the US and in the global context, perched between North America and Europe in the Arctic. 

While clearly this a fluid situation, Europe's freedom of action is constrained by its continued dependence on the US for its security, particularly against Russia, at a time when Europe remains enmeshed in supporting Ukraine. 

Any US move on Greenland faces big hurdles. Greenland is an autonomous territory of the Kingdom of Denmark, a fellow NATO member, alongside the US. European allies, including Denmark, have voiced strong opposition to any unilateral US control over Greenland. The US Constitution mandates that Congress approve the admission of new territory. Despite these obstacles, the very fact that serious discussions are occurring means we must prepare for scenarios that until recently were unthinkable: a shift in Greenland’s status and the implications for global markets.

It is difficult to discern much aggregate market impact these concerns may have in equity or credit indices. Government bond and currency markets have also been calm. However, there are already signs that market participants are taking it seriously. Most notably, European defense stocks are up 15% since the start of the year.¹

Preparing for outcomes 

Using our “prepare, don’t predict” lens, we outline three plausible scenarios for Greenland’s geopolitical future, and consider their potential market implications. The following scenarios, of varying probability, reflect our current assessment, which of course could change with events:

 

Scenario	Description
Status quo maintained	The US pressures and rhetoric continue but ultimately no fundamental change in Greenland’s status. The US might gain some minor concessions (e.g., expanded access for military bases under existing treaties), but Greenland remains under Danish sovereignty and NATO frameworks.
Negotiated agreement (‘Decorous transfer’)	Through diplomacy (and likely significant economic incentives), the US manages to bring Greenland into its strategic orbit with European acquiescence. Historic political norms are bent but not broken, both the spirit and letter of the NATO alliance is maintained, albeit after considerable angst.
Unilateral US action (‘Greenland expropriation’)	At Davos, President Trump said the US wouldn't use force to acquire Greenland and was seeking negotiations on its acquisition. However unlikely, were the US leadership ultimately to decide to take control of Greenland, we see two possible responses from Europe: (a) Passive European response: European powers protest vehemently but stop short of direct confrontation. They conclude that their priorities are in Ukraine and other areas. NATO is deeply shaken but not formally dissolved. (b) Active European response: Europe treats US actions as a breach of fundamental international order with relations between the two in terminal decline. Europe levies sanctions on the US and restrict exports. NATO effectively loses all influence and purpose and breaks apart.

Under all bar the last scenarios of unilateral US action, there is likely minimal lasting market impact. Any risk-off moves (e.g., brief safe-haven flows) reverse. NATO unity stays intact, which is reassuring for European stability. Investors refocus on fundamental drivers (growth, rates) rather than geopolitical noise.

Mapping possible market implications

However, if the US were to seize Greenland unilaterally, we believe several dynamics could unfold. Given the scenario’s unprecedented nature, it is difficult to estimate impacts with certainty, or anchor to base rates. As such, the below views represent our higher-conviction beliefs. 

The immediate aftermath would be characterized by a strongly risk-off atmosphere. While the impact on US equities is uncertain, the most significant consequences would likely play out in non-equity markets. The seizure of nominally European territory with minimal cost or pushback would deal an irrevocable blow to Europe’s current stature, triggering short-term pressure on the euro.

We believe the most acute effects would be concentrated in the Czech Republic, Hungary, and Poland (CE3 countries) and Scandinavia, where the location premium will become material in the short term with an impact on CE3 currency, bond and equity markets. 

That said, a renewed wave of fiscal support for rearmament could alter the picture. Substantial increases in defense spending would push real interest rates higher and enhance the attractiveness of euro-denominated assets. We would expect a pronounced “security burden” premium among Europe’s military powers, with government bonds in France, Germany and the UK sharply underperforming swaps. 

We believe that European equities would likely be caught between the tailwinds of additional prospective fiscal spending and a weaker currency, and the headwind of a higher risk premium. Against this backdrop of heightened global risk, traditional hedges such as gold and silver could likely see further gains, alongside other assets typically favored during periods of instability and inflation. 

No predictions, just preparation 

We don’t know how the Greenland situation will play out—and we won’t venture a bold prediction. Instead, we’ve sketched the landscape of possibilities. As the situation evolves, we have our roadmap of how we would expect markets to respond. Deviation from that roadmap may offer opportunities for active positioning. In every scenario, we remain vigilant and ready to adjust as facts change.

In a geopolitically uncertain world, a disciplined approach of preparation could be the investor’s best asset. We face the future not with a crystal ball, but with a repeatable process. Whether it’s Greenland, another unexpected flashpoint, or any of the myriad risks on the horizon, we will continue to apply our philosophy: “Prepare, don’t predict.” It’s a timeless strategy to navigate an unknowable future—and one we believe will serve our clients well in the years ahead.

Assumptions, opinions, and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass. 

Matthew Rodger, an economist in L&G's Asset Management division covering emerging markets, authored this blog.

1. Bloomberg as of January 16, 2026

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