The list of geopolitical risks worrying fund managers is growing, and potential investment responses are proving slow to evolve.
Terrorism, the Syria conflict, a refugee crisis threatening to unpick European freedom of movement, a possible UK exit from the European Union and tensions between Turkey and Russia are all on the lengthening worry list.
But ask investors if they are changing their global portfolios or trades to protect against these mounting risks and the answer is generally either "no" or "not yet." It's an answer borne out on global equity markets, which are just 7 percent off all-time highs hit earlier in the year.
Indeed, the European Central Bank's decision to shave slightly less than expected off its already negative deposit rate provoked far more evident alarm in financial markets than the deadly but unpriceable geopolitical risks.
"There are huge issues out there … It's not too difficult to start thinking this is history in the making, or that the geopolitical fabric of the world is changing," said Paul O'Connor, co-head of multi-asset at Henderson Global Investors. "But for investors it's not really central yet."
So far there is little hard economic or trade impact that would warrant global portfolio adjustments. Besides, financial markets are still in thrall to macroeconomics and central bank decisions at a time of ultra-low interest rates.
So, even as the World Economic Forum's top global risks in terms of likelihood and impact include inter-state conflict, water crises and cyber attacks, the world economy looks set to grow at a healthy clip of 3.1 percent this year and 3.6 percent the next, according to the International Monetary Fund.
And for all the risks in play, there are countervailing forces suggesting these are not yet systemic.
For Barings Asset Management's Marino Valensise, the bigger picture is still of a globalizing world in which trade barriers are falling rather than rising.
China's currency has been admitted to the IMF's benchmark currency basket and the recent Trans-Pacific trade pact suggests regional trade barriers are coming down.
"We remain in the globalization phase," said Valensise.
To be sure, even if markets at a global level have largely shrugged off geopolitical risk, there are clear pockets of stress at country level, with MSCI's Eastern European share index, rattled by Turkey-Russia tensions, at its lowest level since October.
But the problem remains: how to price or hedge such risks?
Poring over market performance since 1900 can offer some counter-intuitive results. Historical data from the Credit Suisse Research Institute shows the best year for world stock markets in terms of real rate of return was 1933, while the worst was in 2008––despite progress towards globalization.
In fact, on average, over the past 100 years, the premium attached to periods of growing globalization is around one point of the price-to-earnings ratios on equities, according to Barings. While there are many knock-on effects from fragmentation that are hard to quantify, that valuation gap appears limited.
And hedging against geopolitical threats in today's environment can also carry costs and risks. Henderson's O'Connor said that while buying oil was once an obvious hedge against conflict in the Middle East, the recent commodities slump, with crude near 6 1/2-year lows, underscored the unpredictability.
So the likelihood is that even if headlines get worse, it will take a lot more to unnerve global markets.
"So far, the spillovers have been quite contained," said O'Connor.
