Trump's 'fire and fury' roiled stocks — but that's good for investors
© Getty Images

President Trump's recent spat with North Korea has not only messed with many Americans and their feelings of security, it has also had a measurable effect on our economy. When Trump speaks, the world pays attention. The outsized effects of his words, regardless of your opinion of them, are clearly quantifiable. This is perhaps nowhere more evident than in one particular sector: investments.

World stock markets have been affected in various ways by the comments and increased tension between the United States and North Korea. While many investment firms and private investors are aiming for safe haven investments, those paying attention can see that these vents have created unique investment opportunities for value investors. Value investments are by definition good investment vehicles when global financial markets are spooked. Regardless of future geopolitical movements, now is a good time for value investors to open their wallets.

Quick retrospective

Before the outright threat by President Trump of "fire and fury like the world has never seen," North Korea had already commented in retaliation, stating essentially that the consideration of Guam as a target is very real. Trump's comment regarding fire and fury was only the latest in an ongoing series of escalating threats between the two countries, which have caused several dips in stock markets worldwide.

ADVERTISEMENT
Most recently, North Korean leader, Kim Jong Un, stated, “If the Yankees persist in their extremely dangerous reckless actions on the Korean Peninsula and in its vicinity” then North Korea “will make an important decision as it already declared.” This statement has lessened tensions between the U.S. and North Korea for the time being.

 

What investors sold

On Aug. 11, selloffs accelerated in direct response to the remarks flying across the Pacific. Hong Kong’s benchmark Hang Seng Index fell, and the stock markets in Britain, Germany and France all saw lower numbers by midday. This meant that British and European bonds now have lower yields. Why? Because investors thought it would be safer to move their money somewhere else, of course. Meanwhile, ultra-secure investments such as gold and the Swiss franc rose in value.

Predicting the future

The Dow Jones Industrial Average is currently flirting with the 22,000-point line, or a full 200 percent higher than it was in 2009. With a current S&P 500 price-earnings ratio of 25, there is fairly significant room for correction. Of course, the stock market is impossible to predict. No one’s crystal ball is quite clear enough. One thing we know for certain, though, is that many financial instruments and blue chips that are considered to be relatively stable will drop if and when fickle investors get a bit jittery.

When things eventually settle, as they always have, the majority of these will make complete recoveries. Value investors who keep an eye out and step into the market at the right time will be able to enjoy the gains that those who are exiting the market are missing out on. It is no different than watching out for a sale of your favorite brand. When the president speaks to rising homeland security concerns and the possibility of warfare, watch the market for great deals. Be prepared to go value hunting. Even if the investments only return to their previous stable prices, you will still end up with a solid profit.

Staying informed

There is no denying that President Trump’s comments affect the stock market, both nationally and internationally. If you want to trade based on Trump’s war of words, follow his official Twitter account and set Google alerts for his remarks. Following trending hashtags can also help keep you informed when a news cycle that could affect the market begins to blow up. Finally, find a few financial publications you trust so that you can be informed and ready to seize opportunity the moment it presents itself. If the past is any indication of the future, it will not be long.

Chris Markowski (@ChrisMarko) is an author, investment banker, stock market analyst and consumer advocate. He is the personality behind Watchdog on Wall Street and the founder of Markowski Investments.


The views expressed by contributors are their own and are not the views of The Hill.