World Economy

US-North Korea Conflict Hurting Global Economy

US-North Korea Conflict Hurting Global Economy US-North Korea Conflict Hurting Global Economy

Heightened tension between North Korea and the United States could plunge global financial markets and the economy into chaos, according to an investment strategist.

“The damage is done”, warned Jeffrey Saut, Raymond James’ chief investment strategist, after US President Donald Trump and North Korea’s leader Kim Jong-un sent a series of threats of nuclear war between their two countries, CNBC reported.

As tensions between Trump and North Korea escalated, a sell-off in global markets was amid fears the viral back-and-forth could end in a potential nuclear conflict.

Volatility has crept back into the market with many experts warning of turbulence until the situation is resolved between North Korea and the United States.

Speaking to CNBC, Saut said: “There’s been some technical damage done. We wrote about it and told people you may want to trim some positions. I think the market could pull back a little bit here, but it’s still a secular bull market. I think you have another six, seven or eight years left on the upside.”

The investments expert did, however, concede he believes a war between the two nations was unlikely.

Saut added any potential conflict could send the price of oil soaring. “You could have crude oil go to $150 a barrel. But I don’t think that’s going to happen. I think you can transition from an interest driven secular bull market to an earnings driven secular bull market. In the long run, it’s all about earnings, and earnings continue to come in as better than people expect.”

Meanwhile, the Bank of Korea, South Korea’s central bank, recently changed its long-held position on the North Korean economic growth. For years, the Bank of Korea has published improbably low estimates of North Korea’s annual GDP growth, usually claiming it to be between 1% and 1.3%–well below the estimates of virtually all other observers.

This year, though, even the hardcore pessimists in the Bank of Korea have changed their views, and produced a much higher (and much more realistic-looking estimate) of 3.9% growth in 2016. Observers are nearly unanimous now: the North Korean economy is growing fast.

This is not to say the country is becoming affluent, since North Korea remains by far the poorest state in East Asia.

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