It was seemingly only a matter of time before North Korea tested another missile, and over the weekend the nation did just that. North Korea reportedly launched a Hwasong-12 missile on Sunday that reached an altitude of 2111.5 kilometers and covered a distance of 787 kilometers.
This latest provocation by North Korea is likely to keep markets a bit on edge, and may revive the flight to safety bid in metals and other hard assets.
The rhetoric has heated up considerably from both the U.S. and North Korea since Donald Trump took office in January, and it appears that the two nations could unfortunately be headed for a military conflict. Although many do not believe that North Korea has the capability-at least not yet-to strike the U.S. mainland, the nation could target Guam or other U.S. interests in the region.
Prior to the weekend missile launch, investors had been focused on the recent firing of U.S. FBI Director James Comey. The firing of Director Comey by the Trump administration appears to have raised numerous red flags, and some believe that Comey’s dismissal was essentially in retaliation for the ongoing investigation into potential ties between Trump’s campaign and Russia.
There is sure to be more headlines regarding this situation, and it is an issue that could potentially have far-reaching consequences. Some believe that Trump has abused his power, and talk of a “constitutional crises” is on the rise.
The ongoing conflict surrounding the administration could make it very difficult, if not impossible, for the President to get key legislation passed. In fact, the issue is just another of several that are acting as a significant distraction from the work at hand.
Recent discussions of an angry and frustrated Donald Trump possibly looking to shake up his staff may only add to the confusion and worry that seems to be hanging over the White House currently.
Although the stock market looks set to open the new trading week in the green, you have to wonder how much longer stocks can keep marching higher given the amount of geopolitical issues currently being faced. In fact, any one of a number of issues right now has the potential to fuel a significant sell-off in stocks and a massive spike in volatility. Such a scenario could potentially be extremely bullish for gold, and the yellow metal could see significant inflows of investment capital.
Not to beat a dead horse, but it is important to keep in mind that the rally in stocks over the last several months has been largely-if not entirely-based on the notion of tax reform and fiscal spending. At this point, it looks like any tax reforms are off the table for this year, and investors are still awaiting fiscal spending plans.
The more conflict that is seen around the Trump administration, the more difficult it may become to implement these key policies. If progress is not being seen, and if investors begin to get more anxious, the Fed could even elect to hold off on another rate hike in June. Although this may appear unlikely at this point, things can change in a hurry and a sizable sell-off in stocks could make the central bank think twice before taking action again.