{"id":195624,"date":"2024-06-28T10:30:00","date_gmt":"2024-06-28T14:30:00","guid":{"rendered":"https:\/\/ibkrcampus.eu\/uncategorized\/military-conflicts-havent-derailed-long-term-stock-growth\/"},"modified":"2024-07-01T08:52:27","modified_gmt":"2024-07-01T08:52:27","slug":"military-conflicts-havent-derailed-long-term-stock-growth","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/securities\/macro\/military-conflicts-havent-derailed-long-term-stock-growth\/","title":{"rendered":"Military Conflicts Haven\u2019t Derailed Long-Term Stock Growth"},"content":{"rendered":"\n

Key takeaways<\/h2>\n\n\n\n

Market history<\/h3>\n\n\n\n

Markets, over more than 120 years, have experienced a long-term advance despite war, recession, oil shocks, political assassinations, and much more.<\/p>\n\n\n\n

Military conflict<\/h3>\n\n\n\n

Military conflicts test investors\u2019 resolve to stick to their investment plan, but history suggests these events haven’t derailed the long-term growth of markets.<\/p>\n\n\n\n

Long-term focus<\/h3>\n\n\n\n

While unnerving, geopolitical conflicts shouldn\u2019t change investors\u2019 long-term investment plans, in my view.<\/p>\n\n\n\n

History is composed of challenging times. As a global market strategist, my job is to talk about military conflicts and other historic events in the context of stock markets, and to offer some perspective for investors. With that in mind, it\u2019s important to remember that, over more than 120 years, markets have experienced long-term growth despite war, recession, oil shocks, political assassinations, and much more.<\/p>\n\n\n\n

While military conflicts test investors\u2019 resolve to stick to their investment plan, history suggests these events have not derailed the long-term growth of financial markets. I implore investors to maintain a long-term perspective.<\/p>\n\n\n\n

Stock market returns following geopolitical conflicts<\/strong><\/h2>\n\n\n\n

If there\u2019s a factor that impacts market performance, there\u2019s 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.<\/p>\n\n\n\n

Stocks have made significant returns in the 12 months following peak geopolitical risk<\/strong><\/h3>\n\n\n\n
\"Stocks<\/figure>\n\n\n\n

Three things for long-term investors to focus on<\/strong><\/h2>\n\n\n\n

While military conflicts understandably generate concerns about the potential market impact, I believe long-term investors should focus on three questions:<\/p>\n\n\n\n

1. What\u2019s the outlook for the economy?<\/h3>\n\n\n\n

Ultimately, I believe investors should stay focused on the businesses that are going to harness innovations such as artificial intelligence and robotics, develop treatments for debilitating diseases, evolve the nation\u2019s energy sources, and invent new technologies and industries that aren\u2019t even on the radar. History suggests that innovations \u2014 and investment opportunities \u2014 will continue irrespective geopolitical difficulties.<\/p>\n\n\n\n

2. What\u2019s the expected path of Federal Reserve monetary policy?<\/h3>\n\n\n\n

For all the focus on geopolitics, I\u2019d argue that monetary policy matters more. The old adage holds true: Don\u2019t fight the Fed. Historically, the economy has been hurt or helped by monetary policy conditions.<\/p>\n\n\n\n

3. Does this military conflict change the answer to either of those questions?<\/h3>\n\n\n\n

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 this example: The MSCI Poland Index has been one of the world’s best-performing indices since Russia invaded Ukraine, climbing 54.15% from the day of the invasion on Feb. 24, 2022, through May 2024.1<\/sup> That\u2019s not an outcome many investors might have expected in the earlier days of the conflict.<\/p>\n\n\n\n

Stick to long-term investing plans<\/h2>\n\n\n\n

While unnerving, geopolitical conflicts shouldn\u2019t change investors\u2019 long-term investment plans, in my view. History has shown that other factors \u2014 economic growth, business innovation, and monetary policy \u2014 drive the path of the markets.<\/p>\n\n\n\n

—<\/p>\n\n\n\n

Originally Posted June 28, 2024 <\/p>\n\n\n\n

Military conflicts haven\u2019t derailed long-term stock growth<\/a> by Invesco US<\/p>\n\n\n\n

Footnotes<\/strong><\/p>\n\n\n\n