Markets & Geopolitical Events

As with the recent escalation in the Middle East, financial markets are constantly exposed to unpredictable events — from geopolitical conflicts and terror attacks to political transitions, corporate crises, and systemic financial shocks. While each new development tends to generate an element of uncertainty, history consistently shows that markets are far more resilient than what most investors expect.

Reviewing market reactions across more than eight decades of market history helps us to understand how stocks typically behave when the unexpected happens, and which conditions matter most to determine the likely depth and duration of any drawdowns. It is important to note that past performance does not guarantee future results.

Market Reactions: Short-Term Volatility Is Common

Across more than two dozen major geopolitical events since World War II, the S&P 500 has produced an average one-day decline of just -1%. In other words, even seemingly dramatic world events tend to trigger declines that are notable, yet not catastrophic. Typically, markets tend to absorb shocks quickly, stabilize (bottoming on average within 18 days), and recover within a matter of weeks (the average time taken for the S&P 500 to get back to pre-event levels is under 39 days). It is worth noting that the scale of an initial event rarely predicts the magnitude of the market impact.

Source: LPL Research, Bloomberg, FactSet, S&P Dow Jones Indices, CFRA, Strategas 3/2/26
Disclosure: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. The modern design of the S&P 500 index was first launched in 1957. Performance before then incorporates the performance of its predecessor index, the S&P 90.

Cross Asset Market Behavior During Geopolitical Events

• Equities: During periods of geopolitical uncertainty, investor demand often shifts temporarily toward utilities, consumer staples, and defense stocks. Growth oriented and cyclical sectors may lag during these periods of volatility, though they often rebound as uncertainty fades.
• Fixed Income: Geopolitical events tend to trigger flight-to-safety buying, pushing Treasury yields lower as rate policy expectations adjust, particularly if growth expectations deteriorate. If energy prices are affected due to supply disruptions (e.g., in an oil shock) and inflation expectations rise, yields may initially move higher before falling back as risk aversion builds.
• Oil and the Energy Sector: Energy markets frequently embed a temporary risk premium following geopolitical events. Historically, oil prices spike on perceived supply risk and energy equities often outperform. Price pressures fade once physical supply and distribution prove resilient.

In Summary

While global disruptions can feel uncomfortable in real time, history supports a disciplined, long-term investment approach. Shock events introduce volatility, and rarely do lasting damage, unless underlying economic conditions are already deteriorating.

Current economic indicators suggest the U.S. economy remains in an expansionary phase, with steady employment, continued growth, and moderating inflation. While growth has slowed from the strong pace of recent years, the broader data continues to reflect a fundamentally stable economic backdrop.

For investors, the key is not predicting the next headline. Instead, it is understanding the cycle, maintaining diversification, and avoiding emotional decision making during periods of short term turbulence.

Our team continues to closely monitor developments in the Middle East to determine the potential impact on the energy sector, broader equity markets, and the path for interest rates.

If you have specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to contact us to set-up a time to discuss further.

Disclosures:

Past performance does not guarantee future results.

All investing involves risk, including loss of principal. Indexes are not investments, do not incur fee and expenses and are not professionally managed. It is not possible to invest directly in an index.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor. The charts above are for illustrative purposes only.

S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks. Diversification does not ensure a profit or protect against a loss in declining market. This material is provided for educational purposes only.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.