When Markets Shrug and Norms Quietly Erode

Published: January 2026

As we witnessed in 2025, markets have an impressive ability to absorb noise. Over recent weeks, despite renewed geopolitical posturing involving Donald Trump, investor reaction has been remarkably contained. Energy stocks have stirred, defence names have edged higher, but beyond that, there’s been little more than a collective shrug. 

On one level, this makes sense. Markets trade cashflows, not constitutions. They respond to immediate supply constraints, not abstract principles. Oil disruptions move prices, defence contracts support earnings. None of that is new. 

But what is more interesting, and arguably more concerning, is what markets are not pricing in. 

The issue isn’t about Venezuela, it’s about precedent 

The renewed focus on Venezuela is not, in isolation, market moving. The country has long been economically marginal to global growth and geopolitically volatile. But the tone matters. When foreign policy becomes explicitly transactional, framed around compliance rather than cooperation, it chips away at something far more valuable than short-term stability: international norms. 

The global system doesn’t function because international law is perfectly enforced. It functions because the superpowers behave as if the rules matter, even when inconvenient. When, not if, that pretence weakens, the consequences are rarely immediate, but they are often cumulative. 

Why norm erosion matters for markets 

This is where the longer-term risk sits. A world where power increasingly overrides principle quietly reshapes investment assumptions and Trump’s actions, by accident or design, could lend to current instability: 

• It strengthens the narrative used by Putin’s Russia in Ukraine, that borders are conditional rather than fixed. 

• It reinforces China’s framing of Taiwan as a political issue rather than a sovereign one. 

• It turns alliances into arrangements of convenience rather than commitments of principle. 

Even the resurfacing of rhetoric around Greenland, a democratic, Western-aligned territory, is telling. When everything becomes negotiable, uncertainty doesn’t spike overnight; it seeps in gradually. 

Why markets are calm, for now 

Markets will discount the next twelve months far more heavily than the next twelve years. As long as trade flows continue, earnings remain resilient, and financial conditions stay manageable, risk assets can remain well supported. That’s why reactions so far have been confined to sectors where the transmission mechanism is obvious and immediate: energy security and defence spending. 

But history suggests that structural uncertainty is rarely priced-in until it becomes unavoidable. The erosion of norms doesn’t announce itself with a crash, it shows up later as higher risk premia, regional fragmentation, and a growing preference for resilience over efficiency. 

The investment takeaway 

For us, this isn’t a call to panic or reposition our client portfolios around headlines. It is a reminder that geopolitics matters most not when it shocks, but when it slowly rewrites the rules of engagement. 

Markets may shrug today. But norms, once weakened, are hard to rebuild, and markets eventually notice that too. 

We are always here to help you with any questions or concerns you may have.  If you would like to talk to one of our Chartered Financial Planners, please contact us on 01223 233331 or email info@mmwealth.co.uk. 

Disclaimer 

Opinions constitute our judgment as of this date and are subject to change without warning.  The value of investments and the income from them can go down as well as up, and you may not recover the amount of your original investment.  Past performance is not a reliable indicator of future performance. 

The information in this article is not intended as an offer or solicitation to buy or sell securities or any other investment, nor does it constitute a personal recommendation. 

The information contained within this blog is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing.  Levels, bases and reliefs from taxation may be subject to change.