Friday, August 11, 2017

Markets reaction to Trump's cavalier attitude about DPRK's nuclear threat

I was watching the news yesterday when I heard Trump say "They (North Korea) have been doing this to our country a long time, for many years. And it's about time that somebody stuck up for the people of this country and the people of other countries": http://heavy.com/news/2017/08/trump-north-korea-briefing-statement-get-act-together-trouble-video/

And today we got this tweet from Trump (which appears to be written by a bad action-movie screenwriter):

It's obvious the North Korean regime is getting under Trump's skin. Worst of all, now the Donald thinks his "honor" is at stake. That's a dangerous place to be, for all of us, because Trump is in charge of our nuclear arsenal & he doesn't seem capable of understanding the risks (for example, yes, our nuclear weapons are powerful beyond belief, but even if we decimate North Korea, a nuclear winter would kill us all afterwards).

One (not unexpected) consequence of all this nuclear annihilation talk is the following (A Quartz's article reported it a couple days ago): "Fearing nuclear winter, investors bought Swiss francs":

https://qz.com/1049998/trump-north-korea-and-the-markets-fearing-nuclear-winter-investors-are-buying-swiss-francs/

According to the article, Donald Trump's threat to unleash "fire and fury like the world has never seen" had traders seeking refuge in the Swiss franc because "Switzerland is a rich country with healthy finances and few geopolitical entanglements".

Of course, the health of stocks & currencies would be of no concern whatsoever to humanity if there's a nuclear war. Nevertheless, it is still interesting to observe markets reaction as an early indicator of where we are at this moment in time. According to this NPR article: "Global stock markets ended their worst week in months amid rising tension between the U.S. and North Korea, though U.S. stock indexes steadied on Friday to close up slighlty". 

http://www.npr.org/2017/08/11/542856313/north-korea-has-markets-nervous-but-not-panicked

The article adds:

"The Wells Fargo Investment Institute describes the market response, so far, as "tepid." In a note to investors, Paul Christopher, head global market strategist, and Tracie McMillion, head of global asset allocation, suggest, "the threat of a nuclear weapon is certainly more serious than previous threats, but that threat also may increase the probability of a diplomatic solution." They suggest the U.S. and China, a North Korean ally, could work together to de-escalate the situation."

It appears the markets went from the "Trump bump" to assessing "the threat of a nuclear weapon". "More serious than previous threats", indeed. 
But I do hope the strategists are right when suggesting the U.S. and China "could work together to de-escalate the situation". Despite Trump's bellicose tweets, we can only hope more serious officials from the Trump administration make an effort to find a diplomatic solution, and avert a catastrophic war. 


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