Investors have grown comfortable with periodic increase in tensions between the two Koreas. Photo: Reuters, Damir Sagolj

Goldman Sachs on Korean peninsula risk and the market:

“Do geopolitical tensions on the Korean peninsula ever price? Our answer is yes, but not much. Historically, market participants have more often been rewarded for fading negative price moves than for hedging them. Our sense is that investors have become comfortable with the view that geopolitical tensions invariably blow over, that markets rally back, and the right trade is to buy the dip. The result is a market psychology that is relatively resistant to the pricing of geopolitical risk.”