Americans have once again been forced to debate the likelihood of World War III, thanks to the erratic behavior of a thin-skinned 71-year-old with a smartphone.
But for all the doomsday talk, U.S. stocks don’t seem to care much.
The S&P 500 Index
continues to set new records like clockwork, and is sitting on a 14% return since Jan. 1.
And if you really want a sign that the market doesn’t care about global hostilities, consider that the iShares MSCI South Korea Index Fund
is up more than double the S&P 500 this year.
If there was really concern of escalating tensions with North Korea leading to military action, do you really think investors would be so eager to plow money into their neighbor to the south?
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Now, I’m no Pollyanna. There are indeed serious threats out there, and serious risks to global stability broadly and the American economy in particular.
In fact, one of the biggest threats we face right now actually comes from North Korea, but not in the form you might suspect.
The real threat to global markets is hacking and cyberterrorism.
Look at the Equifax breach that affected over 140 million Americans. Or look at the hacking over at Yahoo that compromised 3 billion user accounts and hundreds of millions of users. This is the real war we are fighting in 2017.
Recent reports indicate North Korea has a state-sponsored team of hackers. And while previous targets were “government agencies or media companies in countries it considered hostile … in the last few years, North Korean hackers seem to have become more interested in stealing cash.”
Case in point: the recent theft of $81 million from the Bangladesh central bank’s account, or a thwarted attempt to infiltrate the Polish banking system.
Missiles from North Korea pose a tangible threat and prompt visceral fears. But while less tangible, the risks posed by hackers is perhaps more likely to cause havoc for citizens, businesses and governments in the near future.
So what do we do about it?
Unfortunately, consumers are increasingly powerless. It’s the major gatekeepers of our information such as Equifax that get hacked at scale, not individuals being careless with passwords.
Equally disturbing is our political environment, where do-nothing Republicans have buried their heads in the sand about clear and decisive evidence that Russian hackers interfered with the 2016 election of their beloved Tweeter-in-Chief.
That leaves us with only one real solution: for-profit cybersecurity companies that are our protection against for-profit hackers.
As a result, there is a rapidly growing market for tech firms providing protection and peace of mind to businesses and governments. Worldwide spending on information security was about $75 billion in 2015, according to advisory group Gartner, and is expected to top $113 billion by 2020.
As investors, then, the opportunity is clear. Those who have a foothold in established and growing cybersecurity names will certainly see a good return on that investment as attacks are guaranteed to continue, and the market is guaranteed to grow.
If you’re interested in playing this trend, either as a hedge against the risk of a hacker-driven crisis or simply because of the short-term profit opportunity, here are three trades to consider:
Cybersecurity Play No. 1 — IBM
For those looking for a diversified way to play cybersecurity as part of the broader tech sector, IBM