August 10, 2017 / 4:28 AM / a year ago

Wall Street's resolve overcomes even Pyongyang

NEW YORK (Reuters Breakingviews) - Even the fear of possible Armageddon is no match for Wall Street’s greed. U.S. investors already have shrugged off higher interest rates from the Federal Reserve, mounting protectionist tendencies around the world and Washington dysfunction. President Donald Trump’s blunt warning to Pyongyang might have been a fresh reason to rush into gold or gunsmiths. Mr. Market, however, rarely foretells dire happenings.

North Korean leader Kim Jong Un watches the ballistic rocket launch drill of the Strategic Force of the Korean People's Army (KPA) at an unknown location, in this undated photo released by North Korea's Korean Central News Agency (KCNA) in Pyongyang on March 11, 2016.

Geopolitical tensions have failed to shake stocks from their tranquility. The S&P 500 Index remains 10 percent higher than where it started this year. Daily moves of 1 percent or more have been virtually non-existent. Following Trump’s threat to unleash “fire and fury” on North Korea, the Chicago Board Options Exchange’s Volatility Index jumped more than 20 percent, but gave back half those gains and sits at close to a historic low.

There were small searches for safety despite the lack of a proven investment strategy for even a small nuclear war. The price of gold, for example, increased a little over 1.5 percent on Wednesday. At just over $1,277 per ounce in late New York trading, however, it remains well within the year’s narrow trading range. Much the same can be said for U.S. Treasuries, another traditional haven in times of trouble.

Such tranquility might be explained by Trump himself. The president attempts intimidation so often and so casually, whether to Kim Jong Un, Senator Mitch McConnell or Amazon boss Jeff Bezos, that people increasingly ignore him.

Corporate America is helping to keep the calm, too. Second-quarter earnings have surprised significantly to the upside, with S&P 500 companies exceeding expectations on both the top and bottom line at the highest rate in 13 years, according to Bank of America Merrill Lynch.

Even so, investors can’t really be counted on to see trouble ahead anyway. Nobel economist Paul Samuelson once quipped that the stock market had predicted nine of the past five recessions. Ten years ago to the day, BNP Paribas closed three bond funds in what turned out to be the first global tremor of the financial calamity to come. The U.S. benchmark fell 3 percent on the news, but swiftly rebounded and rallied nearly 8 percent over the next two months. That didn’t end well. For the sake of all, this particular time had better be different.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at and follow us on Twitter @Breakingviews and at All opinions expressed are those of the authors.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below