Risk Appetite Adjustments to North Korea Threat Remain Small

As tensions over the growing threat of aggressive action from North Korea increase, financial markets are continuing to adjust and respond. However, while news headlines dissect the latest action and rhetoric from Pyongyang and the US, investor and stock market reaction and adjustments are less pronounced.

Indeed, while the missile testing and nuclear capabilities of North Korea are dissected and increasingly feared by experts and reporters, many stock market investors have made just minor shifts in their decision making. Risk appetite has fallen back and safe havens are popular, but smaller and riskier investments are by no means being ignored.

What Does the North Korea Threat Really Mean for Financial Markets?

According to many market analysts and economists – right now, not a great deal. Of course, the threat shouldn’t be written off. However, when you break down the realistic possibility of war breaking out between North Korea and the US, it’s just not the most likely scenario – at the moment. Why is that? Let’s take a look at a few key points:

  •       North Korea are highly unlikely to be victorious.
  •       Kim Jong-Un may be many things, but suicidal isn’t one of them.
  •       If a conflict were to arise, the after-effects for North Korea would be very restrictive.
  •        Rather, it could be that North Korea is behaving this way in order to extract an agreement from the        US that his regime is safe from interference.

With that in mind, the chances of King Jong-Un pressing the red button do seem less likely. Which is why analysts and investors are still taking some risks in the current market environment, risks that could secure rewards in the future.

SME’s Should Remain Cautiously Positive

Following on from the further growth of business lending and investment during the summer, SME’s should remain cautiously optimistic in the current environment and not shun extending business finance agreements, or making new ones.

Sure, some investors have shifted to more safe-havens stocks and currencies, but that’s far from all investors. Smaller stocks and business with the right growth and investment plans can continue to give those investors a reason to keep taking – calculated – investment risks.

Of course, some caution is always advised with regards to business finance and investment. That means it’s prudent, even essential, to keep abreast of the North Korea threat. However, at the same time, keep in mind that it’s a situation that should end without open conflict. What’s more, the US will emerge looking stronger than ever, which would be a definite positive for the financial markets and investors alike.

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