There are few things that can frighten investors more effectively than the prospect of a major war. While being nervous about war breaking out is something just about anyone can relate to, investors often layer a further dimension of financial concerns onto an already fraught situation.
It was therefore to be expected that recent developments involving North Korea, the United States, and the global community at large would unsettle many investors’ plans and positions. As a post by Rockwell Trading here points out, however, the damage might not turn out to be as serious as some would have expected.
North Korea is a Well Established Loose Cannon on the Seas of Geopolitics
While Kim Jong Un’s reign over North Korea has differed in some important respects from those of the father and grandfather who preceded him, he has stuck firmly to one tactic that both predecessors valued and appreciated. With North Korea almost never being able to produce enough food or economic output to keep its own population afloat, it has since its beginnings relied upon aid from elsewhere.
At the same time, beneficiaries like the United States, China, and the European Union have not typically offered up their largess without conditions. In particular and especially in recent years, the United States has regularly called for sanctions aimed at discouraging the country’s nuclear weapons program and ambitions.
While its reactionary threats can sometimes seem shocking and there are certainly real reasons for concern, investors have become somewhat accustomed to pricing in the negative value associated with the country’s responses. As a result, the markets have greeted the most recent tensions with somewhat less volatility and negativity than some might have expected.
Rougher Waters Ahead Could Still Make Things Worse
Even if the various major equities indexes held up fairly well through the latest back and forth, however, it is certainly to be expected that an actual outbreak of hostilities could quickly make things much worse. Whether in the form of North Korea finally lashing out in military fashion or the United States launching a preemptive strike, seeing this recent talk turn into action could cause investors all over the world to flee the equities markets in search of more safety.