Contributed by: Nicholas Boguth, CFA®, CFP®
Wars are an awful part of humanity. The loss and destruction that comes from them is tragic. For this reason, the thought of a war starting can make investors want to act – maybe even sell their investments and stock up on cash under the mattress or gold bars in the safe.
It can feel like things are about to take a turn for the worse when a war or a conflict breaks out, but in times of stress it is important to lean on history and data as a guide to help determine the next best course of action.
See below for stock returns 3 months and 12 months after some key conflicts of the past 100 years. Does the data surprise you?
The average 12 month return after the beginning of these conflicts is POSITIVE 8.5%. Most of these you might remember from experience, maybe some better than others, but each of these conflicts came with their own unique set of fears. Some hit close to home, some happened overseas, some felt like escalations into something bigger, but all of these were world-altering events for the coming decades.
Despite that, on average, stocks continued to climb through the turmoil. The global economy and the global stock market are HUGE and complex machines that are going to grind forward no matter what is going on in the world. Some time periods will be a slower grind than others, but there are centuries of data that show time and time again stocks persevere, problem-solve, innovate, and grow their way through time.
The only way to participate in that growth, is to participate in that growth. Selling your stock investments is giving up whatever returns are coming next, for better or worse, and often not a winning strategy. During times of fear and stress, it is a better idea to lean on the diversification of your portfolio, your cash reserves, and your financial advisor to help guide you down your financial path and LIVE YOUR PLAN. Please reach out if you have any questions about yours.
Nicholas Boguth, CFA®, CFP® is a Senior Portfolio Manager and Associate Financial Planner at Center for Financial Planning, Inc.® He performs investment research and assists with the management of client portfolios.
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Center for Financial Planning, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services Investment advisory services are offered through Center for Financial Planning, Inc. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Boguth, CFA®, CFP® and not necessarily those of Raymond James.