Bombs Drop - Markets Pop?

Hey there!

Before getting into this post wanted to drop in and say thank you to all those who are serving or have served. Truly appreciate your sacrifice and service.

Hope you enjoy the post. 🤝

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War headlines are loud. Markets? Not always.

Every time a new global conflict pops up, you’ll see the same reactions:

And yet…history tells a very different story.

Let’s break it down 👇

A CFA Institute analysis looked at U.S. capital market performance around major wars including World War II, the Korean War, the Vietnam War, and the Gulf War.

Their conclusion was pretty surprising, war did not necessarily lead to weak stock returns.

In blue is the “return” and “risk” (shown as avg volatility) of each index over the full time period from 1926-2013. In orange is the average statistics of the same indices during war time.

As you can see the average returns for large and small cap stocks were actually higher than the long term average at 11.4% and 13.8%. What is crazy is that volatility was actually less during war time periods than compared to the average of the index as well (shown by the risk row).

The cliff notes of this study? War does not mean permanent market damage.

Now to be clear, this is not me saying war never hurts markets.

It can. Especially if a conflict disrupts energy supply, spikes inflation, or materially damages global growth, markets can absolutely sell off (like what we are seeing with Iran).

But that still does not automatically justify panic-selling.

Fidelity shows that if you missed just the 5 best days in the market since 1988, your long-term gains would have been reduced by 37%.

Not 5 months.
Not 5 years.
Only 5 days.

Think about that. Just 5 days.

J.P. Morgan adds another critical piece here.

They found that six of the 10 best market days occurred within two weeks of the 10 worst days, and five of the six best days happened after the worst days.

Missing these big days is the cost of trying to be clever in volatile markets.

War headlines are scary for good reason.

But from an investing standpoint, history does not support the idea that every major conflict is a reason to run for the exits.

Panic-selling has historically been the bigger mistake.

I’ll be rooting for the good guys, and investing the same. ~ Cade

Not Buying These Saved Me $1,000s - My Latest YouTube video discussing 12 things I have stopped spending on over the last few years. Avoiding these has literally saved me thousands.

US Forces Try Opening the Straight of Hormuz - There are tons of different news sources out there but one of my favorite right now for keeping up with the Iran conflict is Cappy Army. He does a great job of just giving the facts, and also providing reasonable information on what the future could bring.

Youth Sports are Out of Control - Interesting video on how youth sports costs have exploded over the last few years. Hard to believe that a few little league games during the week has now become families flying 11 year olds across the county to play in tournaments.

No better time to be a guy who monitors the situation.

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