Another week, another series of natural disasters and back-and-forth threats between the United States and North Korea.
Hurricane Maria barreled through Puerto Rico on Wednesday causing power outages in every home on the island. The hurricane continued by hitting the Dominican Republic on Thursday as damages are closing in on $200 billion. Puerto Rico is already struggling with its debt problem so these record-breaking damages are forcing the island’s economy closer to collapsing. Investors in Puerto Rico’s electricity futures are facing major losses as the damages continue to increase. Before the hurricane hit, Mexico City was hit with an earthquake of magnitude 7.1 on Tuesday. As we’ve seen with previous natural disasters, investors sought out safer assets during times of uncertainty. The markets reacted less this time around, however, as it seems investors have grown accustomed to the recent wave of natural disasters.
President Trump trashed North Korea’s Kim Jong Un in his first speech to the UN on Tuesday. He threatened a total destruction of the country if North Korea continues its missile launching practices. Kim Jong Un responded Thursday by insulting Trump with harsh names and promising consequences for his speech. It seems the markets have grown accustomed to this back-and-forth, as they barely reacted to either leader’s comments. If these threats soon turn to action, it will be interesting to see how the market reacts.
Toys ‘R Us filed for bankruptcy on Tuesday after its competition and growing debt became too much to handle. Facing stiff competitors in Amazon (AMZN) and Wal-Mart (WMT), the nationwide toy giant filed its Chapter XI to deal with its decreasing sales and increasing long-term debt. We saw the impact Amazon had on retailers when it bought Whole Foods, and now we are seeing the first real-life casualty.
The Federal Reserve announced on Wednesday that it has decided to leave interest rates unchanged once again. Janet Yellen spoke at a press conference afterwards as she explained a plan to begin decreasing the Fed’s bond holdings in order to shrink its balance sheet. She also hinted at a potential rate hike this year if inflation rises. The dollar jumped heavily following the announcement.
Looking forward: Theresa May will be speaking in Florence on Friday regarding discussions with the European Union over Brexit. Global markets will be watching closely as any speeches from leaders of her status always tend to tip the scale one way or another.