If you have not heard about the March 2016 terrorist attacks in Brussels, you are probably not watching any news channels at all. But the chances are that you heard about the ISIS attacks in Belgium and the foiled plots to attack nuclear centrals in France or Europe.
What does this rise in terrorist attacks mean for the investments in Europe?
Well, first and beforehand, uncertainty and risk raises. Be it about real-estate investments in the European major cities (deemed to be one of the safest premium investments in the developed countries) or shares of the FMCG companies, there are obviously risks associated with purchasing shares of these companies: that is supply chains might be disrupted, key employees might be trapped or even harmed, or other countless factors might kick in. It means that overall the cost of doing business in Europe will increase: higher security costs money and slows down by travelling and communication, travel will be disrupted, insurance premiums will increase slowly but certainly.
Secondly, Europe ceases a of today to be effectively the premium protected marketplace that it used to be in the major investors’ perceptions. In all fairness, with all the recent history terrorist attacks, even the Schengen free area in questioned, whilst the movement of goods or the provision of free services will be hindered. The response to the attacks also shows a more cautious approach from all the investin companies in considering Europe as a safe haven. Even if, despite the attacks, the Euro currency has not varied too much (from 1.08 to 1.11 USD/EUR).
Last but not least, the attacks will introduce a certain element of insecurity to all the finance and even services transactions themselves. Governments will step in further in the finance data sharing chain, raising concerns about confidentiality and data security itself. Some companies will certainly benefit – global banks or global security companies for sure will se their fees rising. But in the big scale, these are at the end extra costs of doing business, as opposed to value adding economies of scale. So all in all it looks like the economical stagnation which started in 2012 will not be over in the next months.
I thought Euro markets would drop more after recent attacks but it’s not happened much yet. If this new world sadly becomes the norm we will see markets dip and real estate drop in some major cities. Hopefully EU governments will put an end to this madness soon. In the meantime, i see defensive stocks as a good play.