No other topic is dominating headlines at the moment like Trump’s verbal assault on North Korea. The US president has promised ‘fire and fury’ in response to the rogue state’s increasingly bold actions.
Last night, Trump warned Kim Jong-un’s regime not to test missiles near Guam. But North Korea obviously has no intention of backing down.
Trump hinted that if Kim ‘does something’, the US will escalate to more than just verbal taunts, saying: ‘It will be an event the likes of which nobody’s ever seen before, what will happen in North Korea.’
It appears there is no end in sight for the hostile rhetoric, and it’s put everyone on edge. When two of the world’s biggest egos collide, there will be consequences.
The only question is: How devastating will these consequences be? More than a few could be very unpleasant.
But let’s ignore any hypothetical situation for the moment and focus on the here and now. Conflict is not something new, and most of the time it can be extremely profitable. If you know where to look.
US stocks suffered their biggest loss since May yesterday. The market is definitely starting to get nervous, and investors are scurrying for the hills to safeguard their money. Gold managed to climb to its highest price in nine weeks today, while bond prices also increased.
Is this it then? Is this the big market crash everyone has been nervously anticipating?
Probably not, but who knows.
What we do know is that you can still make returns in this current market. Because when signs of war abound, some companies in specific sectors surge. Especially the defence industry. In particular, stocks like Lockheed Martin Corp. [NYSE:LMT], Raytheon Company [NYSE:RTN], and Northrop Grumman Corp. [NYSE:NOC]. These are three big US defence contractors, and they defied the rest of the market this week.
Over the span of about 24 hours, in the midst of Trump’s comments, all three companies climbed higher. Northrop Grumman climbed 1.5% higher, Lockheed Martin rose 2.15%, and Raytheon posted a significant 3.5% rise. All three managed to buck the trend, as the S&P 500 dipped 1.68% in the same timeframe.
During times of uncertainty, if you’re savvy enough, you can find investment opportunities in the market.
Whatever the outcome may be from this ongoing conflict, the markets will continue to churn. Whether it will lead to a wider market crash remains to be seen. For now, though, speculation could turn US stocks into potential bargains.
Junior Analyst, Money Morning
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