Are investors complacent about war risks?

War in the Middle East has not spooked financial markets. Are investors complacent?

JPMorgan Chase chief executive Jamie Dimon is certainly concerned. This “may be the most dangerous time the world has seen in decades”, he warned recently, saying wars in Ukraine and Gaza may have “far-reaching impacts” on global markets.

Dimon’s colleague, strategist Marko Kolanovic, is also worried. Already bearish, Kolanovic says Middle East tensions are another reason why investors should be wary about stocks. Meanwhile, Goldman Sachs is cautioning that a “prolonged period of geopolitical uncertainty” is likely to “eventually trigger growth concerns”.

Fund managers appear cognisant of the risks. Bank of America’s latest fund manager survey shows worsening geopolitics is regarded as the second-biggest tail risk in global markets today.

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Nevertheless, it’s striking that the Vix, Wall Street’s fear index, shows little sign of overt concern. It has increased, but is currently hovering around 19, in line with historical norms. Indeed, the Vix is currently enjoying its longest period of calm in five years.

Market calm doesn’t mean investors are complacent – markets may be right in looking past today’s geopolitical strife – but it suggests any worsening of conditions is not priced in.