Chart of the Week: The Reality of Wartime Returns

Chart of the Week: The Reality of Wartime Returns

March 28, 2022

A month ago, Russia invaded Ukraine; surely stocks are down and bonds are up since then, right? Not quite.

This week’s chart plots the returns of a few major markets as measured by Vanguard’s index funds.

Going region by region for stocks: European equities fell the hardest at first—no surprise there—but after tumbling 11.9% in the first two weeks, they had nearly recouped all of their losses as of Wednesday night. The U.S. has been the best-performing region, with Vanguard’s Total Stock Market Index fund up 5.6% since the Russian invasion. Emerging markets are down the most. After falling into correction territory (down 12.3%), Vanguard’s Emerging Markets Stock Index fund has rebounded and is only 4.5% below its prewar level—a loss is a loss, but that’s not a bear market or a crash.

As for bonds, let’s look at U.S. Treasurys—historically the safe-haven asset of choice that you might expect investors to flock to after a war breaks out. Well, Vanguard’s Intermediate-Term Treasury Index fund is off 2.1% since the invasion began.

Two lessons from this chart: First, the market impact of most geopolitical events isn’t as severe or as long-lasting as you might expect. Second, timing the market based on macro events is difficult—if not impossible.

Note: Chart shows cumulative gains/losses for U.S. stocks (Vanguard Total Stock Market Index, emerging market stocks (Vanguard Emerging Market Stock Index), European Stocks (Vanguard European Index) and Treasurys (Vanguard Intermediate-Term Treasury Index) from 2/23/22 through 3/23/22. Sources: The Vanguard Group, Adviser Investments.

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