Investors, Look Past Global Tensions

The average time it has taken for stocks to bottom is 22 days, with the market recovering all losses in an average of 47 days.

(Image credit: Jose Luis Stephens (Jose Luis Stephens (Photographer) - [None])

With tensions again escalating in the Middle East, investors should remain calm and stick to their long-range investing plan. According to investment research firm CFRA, since World War II, the average market loss after military or terrorist shocks has been just 5%, measured by prices for Standard & Poor’s 500-stock index. The average time it has taken for stocks to bottom is 22 days, with the market recovering all losses in an average of 47 days. The biggest hit came from the attack on Pearl Harbor in 1941, when stocks lost 19.8% and took 307 days to recover. Iraq’s invasion of Kuwait in 1990 triggered a 16.9% drop, recouped in 189 days. More recently, in 2017, North Korean missile threats shaved 1.5% off stock prices; the loss was erased in 36 days.

As for worries about spiking oil prices, these days, with increased U.S. crude production, violence in the Persian Gulf region isn’t likely to result in shortages. Nor are oil prices likely to climb high enough to seriously damage the U.S. economy. Expect gold prices to jump when the headlines get scary, but fight the urge to speculate: Gold has rallied sharply already over the past year. In general, a small amount of gold can make sense, via an exchange-traded fund such as iShares Gold Trust (symbol IAU (opens in new tab)), as a portfolio diversifier, inflation hedge and insurance against catastrophe.

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Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.