A cura di Dave Lafferty, Global Chief Strategist, Natixis Global Asset Management
For now, tensions on the Korean peninsula have subsided, and with them, market jitters as well. While volatility spiked last week in the wake of President Trump’s “fire and fury” comments and Pyonyang’s specific reference to the US territory of Guam, the rhetoric has been dialed back.
US military and state department official have largely walked-back Trump’s off-hand remarks. Meanwhile, Kim Jong Un appears to be taking a more wait-and-see approach. Both publicly and privately, the US and China are increasing the dialogue between the two nations, reducing the chance for miscommunication in the event of crisis.
As a result, the risk on armed conflict has dissipated, but hasn’t disappeared. Investors can expect the North Korean situation to return to the uneasy status quo that has prevailed for several years. While the US and China will not be fully aligned on this issue, the appearance of a somewhat more unified front should keep Pyongyang in check. Global equity markets can move North Korea to the back-burner so long as diplomacy is progressing.