The usual calm that pervades financial markets during August has been shattered in recent days. Investors have become increasingly nervous, stock markets have seen several consecutive days worth of losses, and measures of volatility have shot through the roof. The VIX index was up almost 40% at one point today, meaning that investors are expecting something big, dramatic, and terribly damaging to happen. Stock markets are all down, with the Dow, S&P, and NASDAQ all expected to mark a third straight day of losses. Meanwhile, gold, silver, and other precious metals are up for the day.
August is normally not a volatile time for stock markets. Many people are taking their summer vacation, so the expectation is for nothing big to happen. Even President Trump took a vacation of sorts while the White House air conditioning system undergoes renovation. But the recent war of comments between President Trump and North Korean dictator Kim Jong Un has roiled markets and led to fears of conflict with North Korea.
North Korea has threatened to attack the island of Guam with nuclear missiles. Guam is home to a US naval base and a US Air Force base, one which plays host to B-1 strategic bombers. The recent flyover of the Korean peninsula by American bombers was intended to act as a show of force to North Korea, but Kim Jong Un just counteracted that by threatening to nuke the bombers’ base of operations.
The overwhelming fear is that North Korea might actually try to follow through on its nuclear threats, that the United States might retaliate, and all-out war would ensue on the Korean peninsula. That would be incredibly disruptive to world trade and result in tens of thousands, if not hundreds of thousands, of casualties. Let’s hope that cooler heads prevail and that war isn’t on the horizon.
Keep an eye on the VIX index in the coming days to get an indication of where investors see things going and make sure that you’re stocked up on gold and silver if you’re not already. Buying gold and silver before your financial assets lose value is always easier than waiting until after stock markets crash.