Markets are resilient to tragic events

WHILE our thoughts and sympathies are with the victims of the Westminster attack and their families, we as investors are compelled to observe such events with a somewhat dispassionate eye.

It does seem, though, that markets have developed a degree of immunity to this sort of atrocity, and we could observe that developing through the recent terrorist attacks in Paris, Nice and Brussels.

There was a short negative reaction but markets quickly returned to their previous trends.

Even looking back.at the destruction of the World Trade Center in 2001, it’s difficult to calculate exactly how much 9/11 played a part in the three-year bear market that was unfolding at the time.

Of course, markets tend not to be illogical (irrational, sometimes, yes!), and this time there was an understandable markingdown of the shares in companies such as International Airlines Group, parent of British Airways, and Merlin Entertainments which owns several tourist attractions on the south side of Westminster Bridge, including the London Eye.

Interestingly, the shares of Shaftesbury Group, a property company which is exclusively invested in real estate assets in London’s West End, barely twitched. Terrorism has become another factor that investors need to take into account, but as long as potentially affected businesses and the underlying economy are sound, there is no strong reason to predict a sharp reversal of fortunes.

Business has a lot more to fear from cyber-attacks. As we have seen in several high-profile cases in the UK and the US, these can lead to severe disruption and large losses, both financial and reputational, at the individual company level.

Even so, these have not undermined the system. A malevolent hack into, for example, power or water networks could wreak havoc.

We have to trust governments and companies to put the right protective measures in place. John Wyn-Evans is head of investment strategy at Investec Wealth & Investment