HOW NORTH KOREAN FEUD MAY AFFECT GLOBAL MARKETS
Watching the news lately, it is definitely concerning as tensions continue to grow and no one wants to see a clash between two nations with nuclear capabilities. So, when the war-of-words between North Korea and the U.S. reached a new level earlier this month, markets showed a brief slip as investors grew anxious. While we don’t typically address geopolitical events, we want to help ease any financial worries you may have related to the recent conflict.
As we share this information, we recognize that we cannot predict the future and that any military escalation could affect far more than your investments. However, we believe that historic perspective may help ease concerns about the possible impact on your financial future.
What can we learn from the past? Data from Strategas Research Partners shows us that while the markets often have negative reactions to events when it first occurs—it typically recovers within days or months.
For instance, on the day of Pearl Harbor, the S&P 500 declined 3.8%, but it was back within positive territory 20 days later. And just last year, the S&P 500 dropped 3.6% when the BREXIT vote came through — then was up by 19.5% a few months later.[i]
Of course, we don’t want to imagine the friction with North Korea escalating into war. Thankfully, Pyongyang announced on August 15 that they would not, in fact, strike near Guam. And with U.S. Secretary of State Rex Tillerson’s assertion that there is no “imminent threat” of nuclear attack, the risk of war seems to be retreating.[iii]
What Should You Do Now?
Looking forward, we must remember that the markets don’t always bounce back quickly after geopolitical events — nevertheless, making fear-based choices can be very costly to your plan in the long run. No matter what happens, we are here to help you stay informed on current market dynamics and focused on the economic details that drive lasting value.
We will continue to examine the situation in North Korea, but headlines will not distract us from pursuing our #1 goal: protecting your wealth and moving you toward the future you desire.
If you want to discuss your specific strategy or investments in greater detail, please contact us any time.
“Geopolitics can create anxiety in financial markets, but aren’t going to bring the $18.5 trillion beast, otherwise known as the U.S. economy, to its knees.”
– David Rosenberg, chief economist and strategist at Gluskin Sheff