Geopolitical Strife, Portfolio Performance, and People’s Lives

February 24, 2022
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History is filled with geopolitical strife, crises, and the horror of war.

While the effects of these kinds of events on people’s lives can be catastrophic, the negative effects on the stock market tend to be relatively mild. LPL Research has shown that the stock market on average tends to bottom roughly 20 days after a negative event and recover about 43 days afterward.1

 

 

According to Reuters, Bill Stone, of Glenview Trust Co., compiled a chart of even more crises than what LPL measured, and showed that one year from the crisis, the stock market is up about 83% of the time.2 Even when you zoom out one, three, and six months from the initial event, it is up more than 60% of the time in those periods.3

Maybe most surprising (and rather disturbing) is that the stock market has often performed well during times of war. One Chartered Financial Analyst wrote, “...stocks have outperformed their long-term averages during wars. On the other hand, bonds, usually a safe harbor during tumultuous times, have performed below their historic averages during periods of war.”4

No one knows how stocks and bonds will perform in the present. The past is a wise teacher, but it is no prophet. It’s also doubtful that you or your favorite news channel prognosticator is either. We all can be our own worst enemy when we attempt to time the market.

Most of all, remember that though the above data can be helpful when assessing geopolitical impact on investment portfolios, what is paramount are the people that are directly impacted by terror or war.

Let’s not forget them.

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Sources:

1. https://lplresearch.com/2022/01/25/what-could-happen-if-russia-invades-ukraine/

2. https://www.reuters.com/markets/asia/live-markets-what-history-says-about-geopolitics-market-2022-02-18/

3. Ibid.

4. https://blogs.cfainstitute.org/investor/2017/08/29/u-s-capital-market-returns-during-periods-of-war/