Indeed, oil prices have been falling, not rising. Global stock markets have, overall, reached new highs. And credit markets show low spreads, while long-term bond yields have fallen in most advanced economies.
Yes, financial markets in troubled countries – for example, Russia’s currency, equity, and bond markets – have been negatively affected. But the more generalized contagion to global financial markets that geopolitical tensions typically engender has failed to materialize.
Why the indifference? Are investors too complacent, or is their apparent lack of concern rational, given that the actual economic and financial impact of current geopolitical risks – at least so far – has been modest?
Global markets have not reacted for several reasons. For starters, central banks in advanced economies (the United States, the eurozone, the United Kingdom, and Japan) are holding policy rates near zero, and long-term interest rates have been kept low. This is boosting the prices of other risky assets such as equities and credit.
Read more at http://www.project-syndicate.org/commentary/nouriel-roubini-asks-why-global-financial-markets-remain-buoyant-in-the-face-of-mounting-geopolitical-risks#tQiL1yPI3cZCSzfK.99
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
