Military conflicts mostly haven’t affected long-term stock growth

Originally posted – 16 June 2025 – Military conflicts mostly haven’t affected long-term stock growth

Key takeaways

Market history

For more than a century, markets have advanced over the long-term despite war, recession, oil shocks, political assassinations, and much more.

Military conflicts

Military conflicts tempt investors to give up on to their investment plan, but these events haven’t historically stopped long-term market growth.

Long-term focus

Geopolitical conflicts, while unnerving, shouldn’t change investors’ long-term in view.

History is filled with challenging times. Wars, military conflicts, and historic events in general, may seem like the perfect time to reexamine an investment plan given the seemingly heightened risk. But long-term perspective is key. Over more than 120 years, the stock market has grown despite war, recession, oil shocks, political assassinations, and much more. Tumultuous events haven’t derailed the long-term growth of financial markets.

Stock market returns following geopolitical conflicts

If there’s a factor that impacts market performance, there’s an index to measure it. Geopolitical risk is no exception. The chart below illustrates 11 points in history where we experienced a peak in the Geopolitical Risk Index, and it shows the return of the S&P 500 Index 12 months after that peak. In most cases, the stock market rose significantly in the year following peak geopolitical risk.

Stocks have typically grown significantly in the 12 months following peak geopolitical risk

S&P 500 Index returns 12 months after a peak in the Geopolitical Risk Index

Source: Economic Policy Uncertainty, 10/24. The Caldara and Iacoviello GPR index reflects automated text-search results of the electronic archives of 10 newspapers: Chicago Tribune, the Daily Telegraph, Financial Times, The Globe and Mail, The Guardian, the Los Angeles Times, The New York Times, USA Today, The Wall Street Journal, and The Washington Post. Caldara and Iacoviello calculate the index by counting the number of articles related to adverse geopolitical events in each newspaper for each month (as a share of the total number of news articles). Past performance does not guarantee future results.

What long-term investors should focus on

While military conflicts understandably generate concerns about potential market impact, I believe long-term investors should focus on three questions:

1. What’s the economy’s outlook?

Ultimately, I believe investors should stay focused on the businesses that will harness innovations such as artificial intelligence and robotics, develop treatments for debilitating diseases, evolve the nation’s energy sources, and invent new technologies and industries that aren’t even on the radar. History suggests that innovations — and investment opportunities — will continue regardless of geopolitical difficulties.

2. What will the Federal Reserve do with monetary policy?

For all the focus on geopolitics, monetary policy probably matters more. The old adage holds true: Don’t fight the Fed. Historically, the economy has been hurt or helped by monetary policy conditions. It’s important that the Fed recently cut interest rates by 50 basis points and seems poised to cut again before the end of the year.

3. Does this military conflict change the answer to either of these questions?

Typically, the answer is no, so long as the conflict remains contained or regional. And that can run counter to what some investors might expect. Consider a couple of examples. The MSCI Poland Index has been one of the world’s best-performing indexes since Russia invaded Ukraine, climbing 69.2% (17.3% per year) from the February 24, 2022 invasion through June 12, 2025.¹ The MSCI Israel Index is up 69.0% (36.6% per year) since the October 23, 2023. These aren’t outcomes many investors might have expected in the earlier days of those conflicts.

Stick to long-term investing plans

While unnerving, geopolitical conflicts shouldn’t change investors’ long-term investment plans, in my view. History has shown that other factors — economic growth, business innovation, and monetary policy — drive the path of the markets.

• 1 Source: Bloomberg L.P., as of June 12, 2025. Results measured in US dollars. Indexes cannot be purchased directly by investors. Past performance is not a guarantee of future results. The MSCI Poland Index is designed to measure the performance of the large and mid cap segments of the Polish market.