Safe haven areas of the market are once again in the spotlight after North Korean leader Kim Jong-un threatened the US with the “nuclear button”.
Starting off 2018 on a dubious note, Jong-un said he would focus on expanding his nuclear ballistic missile programme so that the weapons were ready for “operational deployment” in case his country was threatened by the West.
“The entire United States is within range of our nuclear weapons, a nuclear button is always on my desk. This is reality, not a threat,“ he said, while calling for talks with South Korea.
Safe haven currencies and commodities
Safe havens, where investors can protect their capital during times of uncertainty, like gold, the Japanese yen and the Swiss franc, might therefore be of interest to investors.
Although Japan is positioned near to North Korea, its status as a safe haven currency is reinforced thanks to its foreign asset position. The $106 million CurrencyShares Japanese Yen Trust (FXY) costs 0.40% in fees. It is up 3.5% in USD terms over the last year.
The Swiss franc is a traditional safe bet during FX turmoil. The CurrencyShares Swiss Franc TF (FXF) has $150 million under management and costs 0.40%. FXF is also up 3.5% over the last 12 months.
Greenback under scrutiny
Gold has been rising thanks to a weaker dollar and lower US government bond yields. Investors may flock again to gold as tensions in the Middle East resurface. The SPDR Gold Shares ETF (GLD) offers physical exposure to gold, tracking the performance of the gold bullion. This fund has $34 billion under management and costs 0.40% fees. GLD is up more than 14% over the last year.
Another reason for safe haven investment at the beginning of 2018 is that January tends to be a relatively bad season for stock performance. Cyclical sectors such as industrials and materials tend to perform badly, and the S&P 500 also traditionally loses around 0.5%.
Meanwhile, it is yet to be seen whether equity markets and sectors like US tech will continue their 2017 success. The MSCI All-World Index gained around 22% last year.