North Korea Tensions Hit Stocks as Volatility Spikes
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We have not seen a decline in the major U.S. stock indices like today’s since mid-May. The S&P 500’s biggest one-day drop in almost three months was triggered by an increasingly aggressive exchange of threats between the United States and North Korea. U.S. stocks steepened their losses late in today’s session after President Trump said his earlier warnings to North Korea may not have been “tough enough.” This was in response to North Korea’s claim it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific territory of Guam.
The market is now on track for its biggest weekly drop since the week before the November 8th election. Today, The Dow Jones Industrial Average closed down 204.69 points, or 0.93%, the S&P 500 lost 35.81 points, or 1.45%, and the Nasdaq Composite fell 135.46 points, or 2.13%. The volatility index, VIX, known as the “Fear Index,” surged, closing at its highest since the election. I anticipated a near term increase in market volatility July 27 when the VIX was near all-time lows. With that in mind, I took strategic action to benefit from the expected increase in market volatility and added another defensive element to your investment account. This portfolio position is the VXX, which soared over 13.5% today.
The last market update note I sent was May 17. Highlighted then was my increasing level of cautiousness and made mention of the addition of General Mills to the portfolio due to its defensive attributes. Holdings like GIS, the VXX, cash reserves, gold exposure and currency hedges, will protect your account should high volatility persist. I am confident that maintaining our diversified allocation plan is the most prudent approach to reduce risk.
Your account is being actively monitored as I strive to strategically preserve gains and protect your principal.
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Thank you again for your continued trust and confidence. Sincerely, John Gardner
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