Bad News Can’t Nuke the Bull Market
North Korea just launched another ballistic missile…
“Kim Jong Un Puts America Within Striking Distance,” Bloomberg declares, noting that Little Rocket Man’s most powerful intercontinental ballistic missiles could now probably reach the entire mainland U.S.
The terrifying possibility of nuclear war punched stocks in the gut — for almost 45 minutes. But once the initial shock wore off, the major averages ripped off session lows to launch to new all-time highs. Both the Dow and the S&P 500 finished the day higher by 1%.
So much for that missile scare…
Investors are once again thumbing their noses at the possibility of nuclear war. After all, they’ve seen this movie before. North Korea has tested missiles and threatened military action consistently for the past year.
Yet each time a new headline pops up, stocks initially slip, then almost immediately recover.
North Korean test launches aren’t the only war stories making headlines this year, either. Months ago, the market was forced to digest an airstrike in Syria and the U.S. dropping the mother of all bombs in Afghanistan.
Not to be outdone, North Korea threatened to test new missile technology every single week back in the spring.
Sure, world events were causing plenty of anxiety among the investing class six short months ago. But we took the opportunity to buy the dip. You know the rest of the story. None of the terrifying headlines could stop the raging bull market. As it turns out, North Korea’s threats marked the end of a six-week pullback in the S&P 500 back in April.
Now the market’s headed into the home stretch for 2017. Fact is, we’re going to need to see a lot more than a test-missile crashing into the ocean to derail stocks in December.
If history is any guide, we’ll see stocks add to their gains before the ball drops.
Oppenheimer’s Ari Wald notes that December has never been the S&P 500’s worst month of the year. Ever. Since we’ve seen gains every month of 2017 (minus a measly 0.04% drop in March), it’s safe to expect more upside action from stocks in December.
There’s always enough terrifying news rolling in to convince the average investor sell every share in his portfolio and use the cash to stock up on canned goods and bottled water.
Don’t get me wrong — I don’t take threat of death and destruction lightly. But so far, all we’re hearing is a handful of idle threats that sound vaguely familiar. The U.S. and North Korea have been trading barbs for years. Until we’re confronted with more substantive events, there’s no reason for any panic selling, especially headed into a historically strong month for the markets.
The world didn’t stop spinning during yesterday’s short moments of panic. That’s why we prefer to search for opportunities when the investing herd runs for cover. Market history shows us that geopolitical events like the ones we’re witnessing right now can provide smart investors with a strong buying opportunity. You just need to know what to look for…