The holiday-induced calm in the capital markets conceals a high degree of anxiety. The investment climate has been challenged by heightened geopolitical risk and unusual complaints about the US dollar’s strength from the sitting US President.

While sending an “armada” toward the Korean peninsula, the US ordered a missile strike against Syria in retaliation for the use of chemical weapons and dropped the largest bomb in the world on Afghanistan. Investors do not seem to have gotten a handle on what is happening. For several years, even before deciding to run for President, Trump was critical of US foreign policy. He repeatedly argued against attacking Syria. He wanted to reset the relationship with Russia, but both sides now recognize that the relationship is strained at best.

There were other remarkable volte-face moves this week. After repeatedly criticizing the Obama Administration for not citing China as a currency manipulator, he indicated this week, he won’t either. China’s abstention in the UN Security Council vote to condemn Syria for its use of chemical weapons was an important diplomatic signal. The US, Russia, and China are in a fluid dynamic. One of the criticisms of Obama’s foreign policy was that he allowed the other two large nuclear powers, China and Russia to have an alliance of convenience and frustrated US multilateral efforts, including at the UN.

Initially, it appeared the Trump would try to peel Russia away so better to confront China on trade and activity in the South China Sea. The investigation into connections between some people in Trump’s campaign and Russia may add another dimension to the Administration’s response. Russia’s support for Syria’s Assad and its apparent complicity revealed the underlying conflict of interest. Meanwhile, Trump has made some warm comments about China and seems hopeful that China will rein in North Korea. 

Many investors and observers are worried that North Korea may conduct another nuclear test as early as tomorrow, which is the 105th anniversary of the birth of North Korea’s founder Kim II Sung. Gold is has gained 2.6% this week, its fifth weekly advance. Indeed, here in 2017, the price of gold has fallen in only three weeks and is up around 12%.