The standard response to all this from a political commentator would be to tut-tut about the short-sightedness of investors. But there is another possibility. Maybe the markets are right. Of course, from time to time, a political shock will cause stocks to fall – for a while. But recent experience suggests that the recovery is often surprisingly rapid.
In the first week of trading after the terror attacks of September 11, the Dow Jones fell 14 per cent. But the Dow and the Nasdaq recovered their pre-9/11 levels within months of the attacks.
It has been a long time since international politics really transformed the outlook for investors for years – rather than for weeks or months. The last times I can think of were the oil shocks of the 1970s that followed the Arab-Israeli war of 1973 and the Iranian revolution of 1979.
Since then, the world has been characterised less by geopolitical risk than by the much less often cited idea of geopolitical opportunity.