Ukraine & The Markets
We are in a remarkably tense global situation. On the night the Russians attacked Ukraine, I started to get emails from clients and friends. I got up and checked the markets in Asia and saw big down numbers. It was hard to sleep that night, so I got up at 5 am and started researching how the stock market has done in times of war. What data can I wrap my mind around and share with readers? What do we do as investors?
The best summary I found on how markets did during major military or political incidences since 1941 was released in January 2020 by Steve Stovall of CFRA when tensions were building between the US and Iran.
This study was re-cited on Seeking Alpha last week. The original research looked at 21 different military or international incidents since 1941. On average, the S&P fell -1.2% on Day 1 with a -5.0% total drawdown, bottoming out after 22 days and fully recovering on average by 47 days, and up 13% one year later. Even the longest bounce back was still less than one year! And, did you know the DOW rose by 7% per year during World War II? You can read the full study here.
Markets have experienced some wild gyrations these past few days and remain on edge. While past performance is never a guarantee of future results, the evidence does seem to suggest that the market is its own animal with some correlation to negative events in the short-term but somewhat independent of these if you keep a longer-term view and keep very diversified.
Now is not the time to overact. Now is the time to pray for peace.