North and South Korea have been at loggerheads for over 60 years and it could be that this latest flair up is simply 'tough talk' from North Korea and the situation passes without any implications. North Korea has also become very vocal towards the U.S. and this week ratified a law regarding "counter-actions" against the U.S. which includes a nuclear strike. They also plan to kick-start their old nuclear programs. So is it different this time? Well the answer we hope is "NO"! This is simply North Korea flexing some muscle as they like to do, and no military action will occur. Both the U.S. and South Korea have been fairly quiet, which is a good sign and there does not seem to be any out of the ordinary deployment of troops by North Korea.
Nevertheless, tensions like this can spook markets, and that has happened with the South Korean market falling to five month lows, and the currency depreciating. Other risk (equity) markets around the world have also slipped which may be partly due to the uncertainty around the situation. In general wars, terrorist strikes or severe threats lead to equity markets falling off. Safe haven assets may provide investors with some solace during these times, and gold could be a good answer, although of late that hasn't proven the case with the gold price falling to YTD lows (Gold).
Geo-political trouble is always hard to quantify when purchasing stocks but it is important to be aware of possible conflict and make sure the reward is worth the risk.
Hopefully this will all blow over with no violence, but it is definitely something to keep an eye on!
(Does anyone have a spare Nuclear bunker lying around?)
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