G-NXJ9T4576L How Geopolitical Events Impact Investment Portfolios
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How Geopolitical Events Impact Investment Portfolios

Geopolitical risk is rising as tensions between Russia and Ukraine escalate in Eastern Europe. Financial markets are watching closely as the situation evolves, exacerbating an already volatile market. Given these headlines, you may be wondering how geopolitical events historically impact the stock market. Below is a list of 12 historical geopolitical events from past decades, and the S&P 500’s performance in the days and months after each of the events.


The data show the stock market historically sells off when geopolitical events initially occur. Case in point - the S&P 500’s average price return on the first trading day following the 12 events was -1.5%, suggesting investors sold stocks due to the initial geopolitical shock. However, the data also show the concerns faded over the subsequent months. The S&P 500’s average 1-month price return following the events was +1.9%, showing the S&P 500 recovered its initial losses and more. Looking even farther out - over the following 6 months, the S&P 500’s average price return was +7%. That said, there are two notable exceptions: Pearl Harbor, which led to further U.S. armed conflict, and Iraq’s invasion of Kuwait, which coincided with an early 1990s recession that lasted from July 1990 to March 1991.


Geopolitical risks are always a concern, and the analysis below is not intended to minimize the events. However, there is limited historical evidence of geopolitical events and international conflicts impacting U.S. stock market performance. In the absence of a direct impact, investors historically look past the events and focus on key long-term performance drivers, such as the economic environment and corporate earnings. Given the U.S.’s economic strength, we expect markets to (eventually) look beyond the current geopolitical tensions.


Note: Data above reflect price movement of the S&P 500 Index in isolated periods. This is not reflective of any particular investment vehicle, and past performance is never indicative of future returns. This should not be construed as investment advice but merely thought-provoking historical context.

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