Trading The U.S./North Korea Summit

Posted Friday, March 9, 2018 by
Shain Vernier • 2 min read

Traders are taking a risk-on approach to the markets following the announcement of a historic meeting between U.S. President Trump and North Korean Premier Kim Jong Un. Thursday’s reports of a pending U.S./North Korea summit have attracted the bulls to equities markets around the globe. Both the DJIA and S&P 500 are trending higher on the New York cash open, driven by fresh risk-on sentiment.

Donald Trump and Kim Jong Un Are Slated To Meet In Coming Weeks.

It is difficult to overstate the significance of this development. Trump will be the first sitting U.S. President to meet with a North Korean leader. Markets are optimistic that this is a step in the right direction, with a majority of global indices putting together formidable rallies.

How Do You Strategize For Geopolitical Events?

No doubt, governments can be hard on the markets. Announcements like the Trump/Un summit bring uncertainty, spiking volatility. How can one account for surprise market drivers such as these?

Aside from aggressively managing risk at all times, there is no single correct answer. Each situation is unique and requires a custom built strategy. The best course of action is to determine possible scenarios, then evaluate the impact each will have upon your trading operation. Admittedly, this is no small task.

Trading the Trump/Un Summit

While President Trump has accepted a formal invitation to meet with Kim Jong Un in South Korea, the meeting still has to come off. In the run-up to the actual summit, here are some things to consider before jumping into an open position:

  • Denuclearization of North Korea will bolster risk-on sentiment. If this occurs, being long the equity indices over the intermediate-term is preferable.
  • Safe-haven assets are going to exhibit exceptional volatility in times surrounding the actual summit. Missile tests, tough talk, or calm resolution are poised to drive the pricing of gold and other commodities directionally. This may lead to some great trading setups and opportune risk vs reward scenarios.
  • Tense times call for risk management. Expect many forex pairs to enter consolidation in the runup to the summit. Investors are likely to take a hands-off approach as the meeting nears. If the markets become quiet, rest assured that a breakout is coming.

These are interesting times to be an active trader. If volatility equals opportunity, we may be in for an outstanding 2018.

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