Headlines this month were not comforting to anyone. Hostilities breaking out in the Persian Gulf, along with creating deadly peril throughout the region, sent financial markets reeling. The principal factors affecting both markets were the threat to world energy supplies caused by war in the region, with the corresponding potential for upward pressure on inflation. And, in fact, US oil prices spiked to over $100 per barrel for the first time since the Russian incursion into Ukraine in 2022.
Without question, military conflict such as that unfolding in Iran and neighboring countries is always disturbing. For investors, there’s additional concern over how these conflicts affect investment performance. But it’s important for investors to be cautious about making significant and reactive investment changes in response to such events.
Remember that markets are forward-looking. Prices move in response to changes in information, and when unexpected developments arise that market participants deem to be poor for markets, markets often drop. The flip side is markets also set prices for positive expected returns. Once the news gets reflected in market prices, investors can still expect positive returns even amid worrisome circumstances.
History bears this out. Global equity markets have maintained an upward bias even in the face of economic and political upheavals. We don’t have to look far for illustrative examples. During the past few years, stock and even fixed-income markets have had positive returns despite multiple wars being fought around the world. But even if we go back a century into the past, the trend holds up. Consider the following historical chart.
Investment Advisory services offered through Equita Financial Network, Inc., an Investment Adviser with the U.S. Securities and Exchange Commission. Equita Financial Network also markets investment advisory services under the name AegleWealth. The foregoing content reflects our opinions and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful. Along with the author’s views, the reflections above include contributions from Beyond AUM and ChatON AI.