November 23, 2015
While most could be forgiven for expecting world markets to be unsettled in the aftermath of last week's terror, it appears that the damaged was very shortlived.
In this week's Switzer's online magazine however, correspondent Shane Oliver argues that the absence of a knock-on effect shouldn't be a surprise.
"Looking at past experience though this is not very surprising at all. First, it’s worth recalling that parts of Europe have lived with terrorism in decades past, eg the IRA campaign regarding Northern Ireland, the ETA in Spain, the Red Army Faction in Germany, Red Brigades in Italy, etc."
As Oliver points out, these threats actually became the norm in many parts of the globe. In addition, they were aimed at soft targets, which have proven to have little impact on economies.
Oliver explains, "Terrorist attacks on soft targets like buildings and sports venues don’t really have much lasting economic impact. So while the 9/11 attacks had a big short term share market impact with US shares falling 12% they had recovered in just over a month. The Bali and Madrid bombings had little impact and the impact on the UK share market of the London bombings of July 2005 was reversed the day after. So while the terror threat is negative for confidence, it would need to cause more damage to economic infrastructure to have a significant economic impact and hence a more lasting impact on financial markets."
Another lesson perhaps on why diversifcation is essential when building wealth so that you haven't put all you eggs in the bricks and mortar basket.
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