The Daily Prophet: Bad News Is Good News Makes a Comeback

North Korea fires an unidentified ballistic missile over Japan. South Korea responds by having four F-15K jet fighters conduct bomb-dropping drills. Japan asks the United Nations Security Council to hold an emergency meeting. U.S. President Donald Trump says “all options” are under consideration. U.S. stocks stage a big comeback from early losses.

Wait -- what was that last part? Although logic might dictate that investors flee from equities, the broader landscape is actually supportive of stocks. You can start with the falling dollar, which is making U.S. exports much more competitive. Then, consider that the uncertainties in Washington coupled with the geopolitical risks could cause the Federal Reserve to slow, or even pause, the path of interest-rate increases. That should soothe concerns and keep a lid on borrowing costs -- especially if the economic data starts coming in much softer, or at least doesn't show an economy in jeopardy of overheating. In that sense, investors have reverted to an old playbook, where bad news becomes good news for markets.