The reaction of financial markets to the terrorist attacks in Brussels on Tuesday was calm and mature, showing that they have learned the lessons of such tragedies, which have become all too common. Nonetheless, markets will find it increasingly difficult to price the longer-term effects, including unusual political developments that could affect the global economy.
The markets' relatively muted reaction signaled that macroeconomic effects would be limited. This forecast of a contained impact is consistent with the after-effects of other such outrages, including those that followed the attacks in London, Madrid and Paris. In previous cases, the impact on overall gross domestic product has usually been limited and transitory, fading with time.
Investors and traders also reacted maturely at the sector level. The price action in markets on Tuesday was characterized by notable differentiation, again illustrating the extent to which the marketplace has learned from previous attacks in Europe. For example, travel and leisure stocks underperformed the market as a whole while health care and technology outperformed.
But even though markets responded rationally in the short run, there now could be a greater sense of uncertainty about what is ahead. The effects of that incertitude are not easy to predict and price.
The main question concerns the ways in which national politics will be influenced by geopolitical developments that are perpetrated by non-state disruptors rather than traditional nation-states. Such changes could have consequences for economic policy, growth and corporate earnings. In this case, it is likely that the Brussels attacks will further fuel the rise of non-traditional and anti-establishment political movements on both sides of the Atlantic.
In continental Europe, this is likely to translate into a greater empowerment of fringe parties that, in countries such as Denmark and France, already have become serious electoral contenders. In the U.K., the disruption will embolden the anti-immigration message of those who want their nation to leave the European Union. In the U.S., it could lead to greater support for Donald Trump in the Republican presidential nomination contest.
None of these developments has yet reached an unambiguous tipping point. But the horror on Tuesday brings such an outcome a step closer. And these events complicate the role of traditional parties, including those now in office, even as a comprehensive policy approach is needed to take over from the increasingly overburdened central banks.
Mohamed El-Erian is the chief economic advisor at Allianz SE.