Worries about a trade war appear to have eased, at least for the moment, but that does not make investors worry-free. The concerns have shifted toward rising US interest rates, perhaps more than anything else, but general anxiety seems elevated.  

The unpredictability of the Trump Administration is not helpful, and even though oil prices recovered, they did react quickly, losing a dollar a barrel in response to his tweet. There have been inexplicable comments about currency manipulation, individual companies, and the back-and-forth on TPP. It is very much on asset managers’ minds even if it is difficult to model.  

North Korea’s announcement, ahead of the North-South summit, that it would close a missile site and refrain from further tests sounds like good news and favorable for risk assets at the start of the new week. It is easy to accept at face value as a wholly favorable development for denuclearization. That would be naive.  

First, this is not the first time North Korea has made such offers. A few years ago, it agreed on a test moratorium in exchange for US aid but then proceeded to test a long-range rocket. Second, if North Korea has acquired the capability to strike the US as it claims, then there is no urgency for further testing. It has a seat at the table. Third, the recent US strike in Syria (without UN authorization), increases the value of North Korea’s nuclear weapons. Crudely and simply put, countries with nuclear weapons are not attacked, and it must be assumed that North Korea recognizes that.  

Equities have traded firmly in recent weeks. Europe’s Dow Jones Stoxx 600 has risen by about 4.2% in the four-week advance it carries into the new week. The MSCI Asia Pacific Index is up three of the past four weeks and has gained 1%. The S&P 500 has also risen in all but one of the past four weeks and has gained a net 3.1%. Earnings season continues, and big oil and pharma, European banks and Alphabet are featured. A strong earnings season is anticipated, so the bar to an upside surprise is high and disappointments are punished.