The markets might be 'desensitised' to terror attacks

Guards stock exchangeJustin Sullivan/Getty ImagesNew York Police Department tactical police officers stand guard near the New York Stock Exchange on September 9, 2011 in New York City.

Following the attacks in Brussels, reactions both political and security-focused poured in from around the world.

According to Scott Brown, chief economist at Raymond James, as devastating as the attacks were, financial markets had little reaction.

“US financial market participants appeared to shrug off concerns about terrorism, following attacks in Brussels,” said Brown in a note Wednesday.

“Sad to say, but the financial markets may have become desensitised to terrorist attacks. In the past, we might have seen a bigger move in the price of oil or the dollar.”

As both the dollar and oil are influenced by international developments, it’s in these areas investors’ shock would be most likely to manifest. As Brown notes, however, both of these assets didn’t move drastically, finishing slightly up for the day following the Brussels attack.

This also held true for stock indices around the world as the FTSE 100 in the UK, DAX in Germany and S&P 500 in the US all started their respective trading sessions down Tuesday morning but ended the day relatively flat.

Brown also noted that in the long run, the impacts on economics tends to be negligible as well.

“Economists have studied the effects of terrorism and, sadly, have had plenty of opportunity to do so,” wrote Brown.

“Some acts of terrorism are isolated incidents; some are recurring events over long periods of time (such as the IRA bombings in the U.K. or Basque separatists’ attacks in Spain). Simply put, the broad range of research suggests that while economic activity may be distorted for a short period, there is usually little lasting impact.

The largest reaction, in fact, came from the British pound. Due to increased concerns over a Brexit from the European Union in reaction to the attacks, the UK’s currency weakened considerably.

“In June, the U.K. will vote on staying in the European Union,” said Brown. “It’s widely expected to remain in the EU, but the attack in Brussels was seen as boosting the odds of an exit somewhat (hence, viewed as more of a negative for the British currency).”

Screen Shot 2016 03 23 at 1.00.12 PMInvesting.comThe British pound, March 21-23.

Brown suggests that markets are not responding to this attack simply because of its commonality following both the Paris attacks in November and San Bernardino shooting in December.

Regardless of the reason, Brown concluded, such events should still be noted.

“Regarding the terrorist attacks in Brussels, our thoughts and prayers are with the victims and their families.”

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