The Daily Prophet: North Korea Proves Adept at Market Timing

Whether intentional or not, North Korea’s latest salvo in the war of words with President Donald Trump was especially worrisome, at least from the standpoint of markets. It is if traders suddenly woke up to the risks, however remote, of nuclear combat. Yes, tensions have been rising for months and markets moved on each time, but Monday was different because Pyongyang chose do some saber-rattling during U.S. trading hours rather than the dead of night otherwise known as Asian trading hours.

But that’s not all. Foreign Minister Ri Yong Ho’s assertion that North Korea can shoot down U.S. warplanes in international airspace as part of its right to self-defense under the United Nations charter came amid a dearth of economic news that would normally influence trading. Add to that the notion that traders are generally complacent when it comes to the various risks facing markets -- whether it be sky-high valuations for everything from stocks to bonds or central banks pulling away their punch bowls -- and the table was set for a meaningful flight from anything deemed risky.

As such, the big losers on the day were stocks, emerging markets and junk bonds, while Treasuries, gold, the yen and Swiss franc led the winners. At one point, the S&P 500 Index was suffering its worst one-day decline since Sept. 5. “The market had plenty to drive the flight-to-quality price action that persisted throughout the session,” the fixed-income strategists at BMO Capital Markets wrote in a research note.