War, Volatility and Investing

War, Volatility and Investing

March 2, 2022

Russian President Vladimir Putin’s invasion of Ukraine has turned a stormy start of the year for stocks into a shock wave of volatility and disruption to the global financial system, and many investors are understandably nervous.

In times like these, it’s advisable to step back and look through a wider lens. For example, when was the last time the markets fell two months in a row? Well, you’d have to go “all the way” back to October 2020—after which stocks entered an extended rally. Since the S&P 500 index was launched in 1957, consecutive down months have occurred about 17% of the time.

We’ve said it before: Investment success is about time in the market, not market timing. In the 65-year history of the S&P 500 index, a trader has had a 1-in-3 chance of losing money over any three-month period. But as the table below demonstrates, the longer your investment horizon, the more likely you are to see a positive return on your investment.

Investing during war
Note: Table covers specified periods on a rolling month-end basis from the S&P 500 index’s 1957 inception through February 2022. Sources: S&P Dow Jones Indices, Adviser Investments.

Of course, comparing a down month in the stock market caused by quarterly earnings misses and one attributable to a major military conflict may seem like apples and oranges. And they are. The Russia-Ukraine war will have a political, economic and humanitarian impact that will reverberate. But, historically, the markets have a way of weathering even dire geopolitical events.

We tracked the impact of over a century of geopolitical crises on the Dow, from natural disasters to wars and terrorist attacks, stretching all the way back to the explosion of the USS Maine in 1898. And we found that, on average, the index was up 4% six months later and 9% after one year.

Our Chart of the Week, below, narrows the scope to instances of terrorism or acts of war. And for our thoughts on how to handle volatility as an investor, check out our special report on the subject.

Chart of the Week: Is Global Strife a Signal to Sell?

As gut-wrenching as it is, this is not the first time in history that war has broken out in Europe. Is a major crisis like this one always a sell signal?

To help answer this question and provide some context, we hit the history books and marked the onset of military conflicts (or near conflicts) and terrorist attacks. Then we measured the performance of the Dow Jones Industrial Average over the ensuing months. (The Dow is only 30 stocks and doesn’t include dividends, but it’s the longest-running “live” index we have.) We found that, on average, stocks were 7% higher six months after the start of a conflict and 8% higher after a year.

It’s certainly possible stocks could decline further—nothing is guaranteed—but six months isn’t exactly a long time to be rewarded for your patience.

This chart shows performance of the Dow Jones Industrial Average 6 months and 12 months after the onset of conflict or acts of terrorism.

Sources: S&P Dow Jones Indices, Adviser Investments.

Podcast: Retirement Spending Rules of the Road

When it comes to retirement planning, there is no shortage of tips, tricks and “top 5” lists meant to help you decide whether you’re ready. But which ones have a grain of truth and which can you safely ignore? In this episode, financial planners Andrew Busa and Diana Linn talk through popular retirement planning advice to help you prioritize what’s really important, including:

  • Rethinking expenses when your lifestyle changes
  • Whether the “4% rule” still makes sense
  • How the “bucket approach” can help you wrap your mind around investment risk

Deciding when to retire is one of the most important decisions you can make. Listen now to let Andrew and Diana help you feel confident about your choice.

Adviser Investments’ Today’s Market Takeaways

There’s no shortage of hyperbolic headlines and provocative punditry in the financial media. But you won’t find such hysterics here. In Today’s Market Takeaways, members of our investment team provide timely videos that clearly and concisely explain what we’re seeing in the markets.

In our most recent Market Takeaways, Vice President Steve Johnson spoke about focusing on the fundamentals, while Senior Research Analyst Liz Laprade answered the question: Is now the time to buy energy stocks?

We hope you find these episodes engaging and accessible. If there are any topics you’d like us to address, please send an email to info@adviserinvestments.com!

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.


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