As U.S. President Donald Trump’s over-the-top comments on North Korea this week have shown, it doesn’t take much to frighten a market that has been soaring for so long.
“They will be met with fire and fury like the world has never seen,” Trump warned, which seemed to imply he is willing to engage in a nuclear duel with another capricious leader on the other side of the world.
Such sabre-rattling rhetoric may appeal to a portion of the president’s base, but on the face of it, starting a nuclear — or even a conventional — war on China’s doorstep would seem bad for the price of stocks.
Cooler heads in the U.S. government, including Secretary of State Rex Tillerson, downplayed the North Korean threat. And markets have learned from experience that Trump’s statements cannot be taken at face value.
Nonetheless, shortly after the verbal nuclear sparring match between Trump and North Korea’s supreme leader Kim Jong-un, world stock indexes began to dip.
The market reaction may be about more than geopolitics.
Repeated record highs
Just last week, we in the media ran photos of the guy with the white goatee celebrating with a hat that said “Dow 22,000.”
In March it was the hat with “Dow 21,000.” As recently as January everyone was surprised when it crashed through 20,000.
There seems to be growing feeling things can’t last.
Bearish traders, that is, those who think markets may have reached unjustifiable heights, are watching for a trigger.
“North Korea is being used as a reason to sell Japanese stocks,” one Tokyo trader told the business news service Bloomberg.
But on the 10th anniversary of the last great global economic crisis there is something else in the air.