Asian Markets Rally in Expectations of Trump/Kim II
Donald Trump and Kim Jong-un are meeting once again to discuss de-escalating the conflict between their two countries. Many do not expect much progress but a little is enough.
Given the longstanding war between the United States and its allies, which is fast approaching its 70th year, and the almost complete lack of progress on ending the war, any positive news may be seen as at least an improvement over doing nothing, or worse, standing by and seeing the situation further deteriorate.
U.S. President Donald Trump and North Korean Supreme Leader Kim Jong-un are currently meeting for a second time, and while many were disappointed by the lack of results of the first summit, just having the two sides having a dialogue at all is a big improvement.
The world of U.S. politics is a pretty partisan affair, and this is particularly the case with the way Democrats view President Trump, so it wasn’t unexpected that the first summit was met with criticism, with many even accusing Trump of worsening things by giving up too much for what amounts to a stated desire by North Korea to try to work things out.
That’s a whole lot better than seeing the parties brag about their nuclear buttons, or trade insults, or evoke visions of fire and brimstone, and that’s exactly where we were at before the first summit. This was significant progress indeed.
The United States and South Korea deciding to suspend their regular “war games” exercises that the Democrats claim involved Trump giving too much away for so little in return really only amounted to a good-will gesture on both sides, as we can well presume that if the countries decide to attack North Korea, they could pull that off without any more practice.
This is a scenario that needs to be avoided at all costs though, and choosing not to provoke North Korea with these exercises is a gesture that does serve to ease tensions and get the conversation on a more productive path. The fact that the men are now engaged in a second summit in Hanoi as we speak is evidence that this gesture has served the matter well.
The Stakes are Much Higher Now
The Korean War did not end in 1953, it still goes on today, even though we’ve been under a cease fire during all the years since. 66 years of a cease fire remaining in place is in a sense a good thing, it’s better than the fighting resuming, especially today with nuclear weapons being used.
While nuclear weapons are usually seen as a deterrent, and they certainly function that way in this battle, we are dealing with two men who not only may be willing to use them if deemed appropriate, they even brag about doing so. This is not a situation that we could expect to relax about if things were left to fester.
It doesn’t take that much to worry stock markets, and the prospects of nuclear war certainly qualify. We would therefore expect them to welcome any potential for progress on looking to try to resolve this rift, and if the Asian market’s reaction is any indication, we should see at least some positive result out of this for the markets.
It’s hard to imagine how this current summit could not at least improve relations between the two countries, and the only question is by how much. Seeing both men take a conciliatory tone to the issue is perhaps the most important thing, and the act of becoming friendlier is an even more important issue than how many nukes each side have pointed at one another.
After all, you only use nuclear weapons on your enemies, and while the two sides have been enemies for all this time, at war with each other actually, warming up this relationship has to be first and foremost. It is unlikely that this summit will not at least bring the two sides together a little more, and sometimes a little more is the best you can hope for.
President Trump, a man who we may think is quite impetuous, is preaching patience here, and patience is clearly what we need as we look to try to find common ground and have the parties realize that they are better off as friends, and remaining enemies is in on one’s best interest.
The Goal First and Foremost Should Be Achieving a Peace Treaty
It is true that de-nuclearizing North Korea is going to be a difficult task, and may not even be realistic. Trump himself has set this as his goal with these talks, but he may realize that the best we might be able to hope for is a de-escalation, although that would be enough if the relationship between the countries improved such that neither side would be worried about a nuclear confrontation, or any military confrontation.
Ending the war should also be high on the agenda, something that Kim appears to be very open to. His country could prosper more by no longer having to take food of the mouths of their people to support their attempts to defend themselves, where words and handshakes may be used instead, measures that may be even more effective in their defense.
There’s also the matter of the current sanctions, which have far from brought them down but have no doubt had a substantial effect upon the country.
There has been much talk about reducing the nuclear threat in the Asian theater, and while that’s certainly important, critical even, there has not been a lot of talk of peace, and the two sides entering a peace treaty would do much to improve this situation.
This probably won’t happen after just a couple of meetings, and Trump may be right that this and the other issues that are in need of resolution will take some real time, but as long as we keep moving in the right direction, we have all the time that we need.
Asia has even more at stake, so we should expect their markets to embrace this issue more. As this latest summit proceeds, we have seen some modest gains in all the major Asian markets save for Hong Kong’s, which closed virtually flat.
Since this news does affect the United States as well, this may also be having a positive effect on U.S. markets, although since we aren’t really seeing much change here, all of this would have to be pretty modest.
If and when the two sides make more significant progress, beyond just an agreement to keep talking with a positive attitude, then we could see more market love, but as Trump says, this will probably take some real time.
Editor, MarketReview.com
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