With tensions continuing to escalate between the U.S. and North Korea, Sunshine State News talked to Florida native Adam Shapiro, a Fox Business Network (FBN) correspondent, about how they could impact the markets and tourism.
Shapiro joined FBN in September 2007 as a New York based reporter. Before that, Shapiro was previously a general assignment reporter in New York for WNBC-TV's "Today in New York" morning show. He also occasionally provided reports for the early evening and nightly newscasts. Before joining WNBC-TV, Shapiro was the anchor of WEWS-TV's Good Morning Cleveland and the early evening newscast, "Live on Five." While there, he received a 2003 regional Emmy Award for Best Anchor and a 2002 Associated Press Award for Best Reporter. Prior to this, Shapiro spent a year as a network correspondent for FOX News Channel (FNC) based in Chicago covering major national news, including the Versace murder and the Louise Woodward murder trial.Before joining FNC, Shapiro anchored the weekend newscast for WXIN-TV (FOX) in Indianapolis, where he received a 1994 Emmy Award for an investigative piece. Prior to that, he was a reporter for WSJV-TV, then ABC affiliate, based in South Bend, Indiana. A native of Miami, Shapiro is a graduate of Syracuse University.
SSN: Do you expect the tensions between the U.S. and North Korea to continue to shake the American markets up this week?
Shapiro: The simple answer is yes. As long as the North Koreans and the president continue to amp up the rhetoric investors will remain nervous. Nervous investors seek safety and we see that with the recent drops in the Dow and S&P. Remember some investors use that nervousness to buy into a market so there are people betting investors will sell preparing to scoop up stocks at lower prices and that could drive markets up. There are other issues which are making investors nervous but the North Korean crisis is driving down markets right now and when I speak to sources in Washington DC and at NYSE, they don't see that changing unless the tone of the statements calms down. One source is calling this our generation's Cuban Missile Crisis.
SSN: How do you expect the Asian markets to react to the continued crisis? Are there particular markets in Asia you expect to see a lot of turmoil in the days to come?
Shapiro: I watch Hong Kong. Obviously the KOSPI index in South Korea is a key market to watch right now too since South Korea is essentially the front line in the diplomatic shouting match. But China has skin in the game in several ways, business trade with Korea as well as hoping to avoid a humanitarian crisis. The HANG SENG index is a good gauge of nervousness among investors trading in Hong Kong. It was down 2 percent Friday. But I also listen to people like Gordon Chang who is a guest on Fox Business and Fox News. He is actually optimistic that there will be a diplomatic solution; that calmer heads will prevail. But again, until that happens analysts are predicting continued "risk off.”
SSN: The tensions between the U.S. and North Korea have even impacted European markets with the Stoxx 600 dropping 1 percent and the FTSE 100 dropping almost 1.5 percent on Thursday alone. Why are the European markets experiencing such dramatic drops over the U.S.-North Korea tensions?
Shapiro: Well the simple answer is a that no investor no matter their location can remain calm when two countries possessing nuclear weapons are threatening each other. But just before the North Korean crisis European investors were preparing for the ECB to detail plans for its version of unwinding its balance sheet or tightening easy money policies. That's the kind of move that some investors see as a reason to take profits. There is also uncertainty about negotiations with the UK regarding BREXIT so its possible the North Korean crisis provided a tipping point and excuse to sell for European investors who were on the edge.
SSN: Are there certain industries that will be more impacted than others by the continued tensions with North Korea?
Shapiro: This kind of question always makes me uncomfortable because "crisis investing" makes me nervous. If I were to trade individual stocks I would be an old school boring long term kind of investor and stocks that pay a good dividend would top my list. Because I cover companies as a reporter I choose not to buy individual stock to avoid any potential conflict of interest. Still, it’s a genuine question and as the analysts on Fox Business have pointed out defense stocks are getting a boost. Just the other day four defense stocks charged into record territory. Among them missile makers like Lockheed Martin and Raytheon. Lockheed Martin makes the laser guided hellfire missile as well as F-35 jet fighter. Raytheon makes Tomahawk Missiles. Other gainers included Northrop Grumman and L3 Technologies.
SSN: States like Florida, Hawaii and Nevada rely on tourism to help boost their economies. If things continue to escalate with North Korea, how do you see them impacting tourism?
Shapiro: That's a good question and I am going to steal it from you so we can ask our guests on Fox Business about it. Until they respond I hope you will permit me to share my personal opinion on this. Remember I grew up in South Florida and worked at one point in Sarasota so I appreciate how important tourism is to the Sunshine State. I doubt many Americans will change their vacation plans based on the current crisis. If however the crisis escalates to more than a war of words, then I think people will choose to delay vacations and stay home. It's hard to have a good time and relax when fellow Americans are in harms way.
Now let me make a plug for the National Military Families Association. We have Americans in harms way everyday which is why one of the foundations to which I donate money is the the National Military Families Association. If you are going on vacation please remember that there are families of our service men and women who are unable to go on vacation or relax with the people they love. Even when the North Korean Crisis abates, there will be members of the armed forces in Afghanistan, DMZ and other dangerous places keeping us safe.
And one final thought about investing in general. Warren Buffett recommends people like us choose index funds when we make our investing choices. History shows Mr. Buffett is accurate. Trying to time a market is a sure way to lose. An index fund tied to the S&P 500 is one way to minimize your exposure to the downside. Of course the S&P 500 can fall. Remember 2008? It fell almost 38 percent. A long term investor, someone who was in an index fund tied to the S&P 500 would have ridden the market down but also rode the market up as it recovered. This is why it is crucially important to be a long term investor. Someone 60 years or older should have a conversation about protecting their investments from risk with a financial advisor but someone in their 30s or 40s should listen to everything that is happening but resist the urge to react. Slow and steady wins the race.
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