The World Economic Forum (WEF), hosted in Davos, Switzerland last week, was never going to be a quiet affair. This year’s event functioned less as a forum for grand economic announcements and more as a reminder of how geopolitics continues to shape markets. The presence of Donald Trump, early in his second term, naturally drew attention. In particular, and following on from our ABSI last week, renewed discussion around Greenland emerged as one of the most closely watched developments during the week.
The Progress Regarding Greenland
President Trump’s comments in Davos reinforced a familiar theme from his earlier presidency: a preference for bilateral leverage and a transactional approach to alliances. Greenland was framed as strategically important to U.S. interests, particularly from a defence and security perspective.
This was not a new idea. Trump has previously raised the topic, but Davos placed it in front of global policymakers and markets. What sharpened attention was the suggestion that trade measures, including tariffs on European allies, could be used as part of broader negotiations.
The possibility of new tariffs raised concerns about renewed trade friction between the United States and Europe, even if only briefly. Markets showed brief sensitivity to the rhetoric, with risk sentiment softening and defensive positioning edging higher.
As the forum progressed, the tone softened, with discussion shifting toward broader Arctic co-operation and security rather than explicit trade measures. There was no agreement on sovereignty, no formal deal, and no immediate policy action. The shift in tone was enough to stabilise sentiment.
Other Key Themes from Davos 2026
Beyond the Greenland discussion, several recurring themes shaped conversations throughout the forum.
Central bank policy remained front and centre. Officials broadly agreed that the peak in interest rates is likely in place, but there was little appetite to discuss rapid easing. The emphasis was on patience and data dependence, reinforcing expectations that rates may stay higher for longer than markets once assumed.
Artificial intelligence also featured, though with a more practical tone than in prior years. Discussion shifted away from hype toward productivity, regulation, and infrastructure. Business leaders focused on where AI is already improving efficiency, and where investment is still required, particularly in power, data centres, and skills.
Energy security and the transition were discussed with greater realism. While net-zero commitments remain, there was broad acknowledgment that the path will be uneven. Investment in traditional energy supply, alongside renewables, was framed as necessary to maintain stability. This balanced view was particularly relevant for commodity-producing nations.
Finally, supply chains and geopolitics continued to intersect. Executives spoke less about full reshoring and more about diversification and resilience. The focus was on reducing concentration risk rather than reversing globalisation outright.
Implications for Australia
The global focus on energy security, critical minerals, and resilient supply chains continues to align with Australia’s strengths. At the same time, the cautious tone on growth and rates reinforces the importance of balance sheet quality and capital discipline.
Australia benefits from being outside the immediate geopolitical tensions discussed at Davos, while still supplying key inputs into global systems. That positioning remains attractive to long-term capital.
The BPC View
Davos 2026 highlighted a world that is adjusting rather than accelerating. Growth is slower, policy is tighter, and geopolitics is more visible in market pricing. The Greenland episode was a reminder of how quickly political rhetoric can influence sentiment, even when fundamentals are unchanged.
For investors, the message is consistency. Short-term volatility driven by headlines should not be confused with structural shifts. Capital continues to favour assets with durability, strategic relevance, and clear cash flow pathways. In an environment where policy signals and geopolitics remain fluid, long-term returns will continue to be driven by fundamentals, valuation, and risk management rather than reaction to noise.
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