Following North Korea’s latest missile launch, and with tensions in the Korean Peninsula escalating, many concerned observers are asking why this potential for international conflict has yet to affect the world’s stock markets.
Hydrogen bombs and medium range ballistic rockets have been detonated by Kim Jong Un’s despot regime, which directly threatens the stability of several key economies in the region, but to date, the markets are largely unaffected.
Looking back through history, it shows that only world wars have ever caused bear markets – with stock markets rising through both Iraq wars, as well as the Bulkan conflicts in the early 1990s. It would appear that economists believe that the latest round of North Korean sabre-rattling isn’t about to trigger either Armageddon or the Third World War.
Writing in the Financial Times this week, Ken Fisher wrote; “US stocks sank 14 per cent — a correction — as the Korean War dawned in 1950 but recovered fast, rising nearly 26 per cent over the entire conflict. Stocks also fell in the run-up to the Six Day War, but rose every day during combat. Markets wobbled before 1991’s Iraq War but rose during the fighting. Ditto for 2003’s invasion of Iraq. World stocks dipped early, then rose 33 per cent (in sterling terms) from March 12 (seven days before the invasion began) until the year end.”
Quite how the next phase of the US-North Korean stand-off develops, nobody quite knows, however, we all hope that the financial markets are calling the threat levels right – there’s far too much at stake to contemplate the alternatives.
Here at The Financial Planning Group we always advise investors to look for a structured, disciplined approach, rather than trying to second guess the markets.
Our aim is to change the fundamental relationship people have with their money, and to give them confidence and clarity in their own future.
If you would like to arrange an investment consultation, please call Tim Norris or Alan Clifton on 0800 731 7614 and we would be delighted to arrange a meeting at our offices in the heart of Teddington.