Wall Street did not react kindly to the news of the canceled summit between United States President Donald Trump and North Korean leader Kim Jong Un.
Following the news of the cancelation of the proposed June 12 summit in Singapore, the Dow dropped as much as 250 points on Thursday. The Dow was not the only index affected by the news. Both the S&P 500 and Nasdaq also dropped almost 1 percent each before all three rebounded and ended the day with just modest losses. The market had been gambling on the hope of denuclearization, thus the breaking news that the summit will not be happening as planned sent stocks down.
Elsewhere, South Korean funds experienced a sell-off on the heels of the news, with the primary fund dropping approximately 2 percent. The volatility index (VIX) surged 8 percent, reflecting the unease many investors felt on a global scale. The only winner of the day was gold, which rose more than 1 percent. Historically, gold performs well in times of economic uncertainty, as it is seen as a stable investment. Because of the highs and lows of the world political landscape over the last few months, this precious metal is experiencing huge gains. Unfortunately for US investors, the dominating headlines in the political spheres have masked many of the corporate wins announced at the end of the first quarter.
Further complicating the markets are escalating tensions between the US and China. Despite months of back and forth between the world’s two largest economies regarding reciprocal tariffs, the tensions had died down in recent weeks, leading investors to believe that a trade crisis might be averted. However, earlier this week, Trump alluded to his belief that Chinse President Xi Jimping might be the impetus behind North Korea’s sudden reluctance to move forward with the proposed nuclear talks. Now that the summit is off the table, investors worry that the tariffs might be back in play.