U.S. equities and stock exchange traded funds more or less evened out after the knee-jerk, risk-off reaction to North Korea’s latest missile test that fueled tensions between Pyongyang and Washington D.C.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEARCA: SPY), iShares Core S&P 500 ETF (NYSEARCA: IVV) and Vanguard 500 Index (NYSEARCA: VOO), pared early loses and were unchanged late Tuesday.
U.S. markets initially weakened after North Korea launched its first missile over Japan’s main islands since 2009 in its latest in a string of direct provocations that have shaken markets in recent weeks. The Tuesday launched also prompted a stern warning from President Donald Trump that “all options are on the table,” Reuters reports.
“It’s clear that geopolitical tensions have risen with North Korea firing the missile over Japan,” Markus Stadlmann, chief investment officer at Lloyds Banking Group, told the Wall Street Journal. “But I think it’s too early to say whether there will be a more long lasting impact. If that test remains all there is, then probably markets will calm down quickly.”
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Some saw this renewed geopolitical risk as a trigger to scale back some of their long-held positions and lock in gains.
“We have been selling and trimming out of our larger, longer holdings,” Trip Miller, a managing partner at Gullane Capital Partners, told the WSJ. “As valuations have gone up, we’ve found more to do on the short side.”
Further supporting the equity markets, a measure of U.S. consumer confidence rose in August to the second highest reading since late 2000, and home-price growth rose slightly in June due to upward pressure form limited inventory and improving demand.
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