Please U-Turn Here

🌍 The Greenland "U-Turn": From Tariffs to Cooperation

• Policy Shift: Following intense pressure from aides and NATO leadership, President Trump has officially ruled out the use of military force and scrapped the 25% tariff threats against the EU.

• New Framework: Instead of annexation, the US is moving toward a "framework of a future deal" focused on defense and mineral development. This essentially reverts the situation back toward pre-existing treaties, though with a renewed focus on the Arctic's critical resources.

• Market Relief: Wall Street gapped higher following the announcement. The "TACO trade"—a pattern where aggressive threats are followed by swift reversals—sparked a significant rally, particularly in small-cap stocks (Russell 2000), which hit record highs as the threat of a transatlantic trade war evaporated.

💡 Stock Idea: Caterpillar (CAT) — The Arctic Play

Caterpillar remains at the center of the current industrial narrative. Despite the political noise, CAT has been a dominant performer, surging nearly 60% in 2025 and continuing its momentum into January 2026.

• Infrastructure Lead: Even without a full Greenland "purchase," the new cooperation framework emphasizes mineral development and Arctic defense. Caterpillar is uniquely positioned with its specialized cold-weather equipment to lead the infrastructure build-out required for these remote operations.

• Data Center Boom: Beyond the Arctic, CAT is seeing massive demand for its power generation systems. Tech companies are utilizing Caterpillar’s reciprocating engines to power the expanding grid of AI data centers.

• Backlog & Growth: The company recently reported a record $39.9 billion backlog. While its valuation is currently at a premium (Forward P/E around 28x-30x), its role in both traditional infrastructure and the AI-driven power crisis makes it a core industrial holding.

I went into details during my latest live webinar! Catch the replay here:

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The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.