“Stop worrying about the world ending today. It’s already tomorrow in Australia.” – Charles Schulz, cartoonist and creator of “Peanuts.”
The S&P 500 is less than 2% away from new all-time highs, yet worries and concerns remain top of mind. Clearly, the impact of AI has worried many investors, with software, trucking, and financial services all hit hard in the past few weeks, but one bigger worry is whether the US could attack Iran.
Even amid the conflict in the Middle East, the stock market has held up surprisingly well, but the real action has been in the oil markets, with crude oil recently up over $70/barrel.
By no means are we minimizing the potential for more conflict in the Middle East and we hope whatever happens, it is resolved quickly within the scope of any objectives. Of course, just creating a credible threat may be part negotiating tactic. But the bigger question is what will happen to markets if the US does strike Iran? In the near term, some weakness and a spike in oil is likely, not to mention safe havens like gold and bonds finding a bid. But the bigger picture is a different question.
Here’s a list of some of the largest geopolitical events in market history and how stocks did afterwards. Yes, near-term volatility and potential weakness are common, but as you go out, the returns are more positive—in fact, the S&P500 is up a median of more than 5% six months later for the events below.
At the end of the day, some of the poor returns took place during recessions, skewing the data. After John F. Kennedy was tragically assassinated, stocks gained 23% the next 12 months, thanks in part to a strong economy. A year after the war in Iraq started in 2003, stocks were up nearly 30%, as the economy recovered from the tech bubble. More recently, after Hamas attacked Israel on October 7, 2023, global stocks soared for a year, led by the Israeli stock market.
This is a situation we are watching closely, but the bottom line is that geopolitical issues rarely become major investment issues if the economy is on a solid footing. Thanks as always for reading and for our latest thoughts on tariffs, AI, the economy, and so much more. Please watch our latest Facts vs Feelings below. 📺🍿
For more content by Ryan Detrick, Chief Market Strategist click here.
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