Wall Street Ponders Nuclear War

The Wall Street Journal reports:

Here’s a question that’s probably not on the CFA exam: What happens to financial markets if two nuclear-armed nations go to war? After a week of escalating tensions between the U.S. and North Korea, some financial analysts are now taking a stab at it.

Strategists at Nordea Markets estimate that in the unlikely event of “a potentially uncontained military conflict” in which global superpowers like China and Russia get involved, the European Central Bank would have to implement “highly dovish forward guidance” and the yield curve would likely flatten due to weaker risk appetite.

Here’s the forecast from Shane Oliver, head of investment strategy and chief economist at AMP Capital: Should there ultimately be a significant military conflict, with North Korea likely launching missile attacks against South Korea and Japan, “this would entail a more significant impact on share markets with, say, 20% or so falls before it became clear that the U.S. would prevail.”

The WSJ’s headline for this piece: “How Do You Price A Problem Like Korea?”