Advertisement
investing

How Stocks React to Global Crises

History shows that after an initial dip, share prices tend to bounce back smartly.

Given the onslaught of news about global terrorism, military confrontations and political tensions, it’s not surprising that investors are concerned that a geopolitical crisis could torpedo their portfolios. A recent poll conducted by Gallup and Wells Fargo Investment Institute, the banking giant’s research arm, found that three-fourths of investors are worried that current geopolitical issues will harm their investments—the top worry among those polled. (Worries about domestic politics came in a close second, at 69%.)

Fears about global turmoil may be misplaced. Over the past several decades, geopolitical crises have seldom had a lasting impact on the stock market.

Advertisement - Article continues below

InvesTech Research looked at nearly a dozen geopolitical crises, from the German takeover of France in 1940 to the U.S. invasion of Iraq in 2003, and found that Standard & Poor’s 500-stock index, on average, fell 2.5% in the week following a crisis but was up 7% after six months and 11.5% after one year.

InvesTech president Jim Stack says investors are distracted by global tensions at a time when stocks face bigger risks, such as high share prices in relation to corporate earnings and other measures of value. Other concerns include the possibility of rising inflation and higher interest rates, Stack says.

Advertisement
Advertisement

Most Popular

Medicare Basics: 11 Things You Need to Know
Medicare

Medicare Basics: 11 Things You Need to Know

There's Medicare Part A, Part B, Part D, medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare --…
September 16, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
September 10, 2020
What Trump's Payroll Tax Cut Will Mean for You
Tax Breaks

What Trump's Payroll Tax Cut Will Mean for You

President Trump issued an executive order to suspend the collection of Social Security payroll taxes. How much could it save you?
September 17, 2020

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
Best Bond Funds for Every Need
Investing for Income

Best Bond Funds for Every Need

In a changing market, it’s important to remember why we hold bonds in the first place.
September 15, 2020
Does a 40% Bond Allocation Make Sense in Today’s Portfolios?
retirement planning

Does a 40% Bond Allocation Make Sense in Today’s Portfolios?

For many investors, the short answer is no. Here’s why, and what you might consider instead.
September 7, 2020
Is the Stock Market Closed on Labor Day?
Markets

Is the Stock Market Closed on Labor Day?

The good news: Stock markets and bond markets alike get the day off for Labor Day. But traders don't get an early start to the weekend.
September 5, 2020