Historical Context
If you’re like me, you may find yourself checking the news more frequently than you normally would. Times like these tend to rattle us and bring forth several questions and concerns. We may be thankful for our security domestically, while simultaneously losing sleep over loved ones who may be directly affected overseas. Either way, it’s a good time to engage in conversation. Let’s talk!
From a financial-matters standpoint, I have fielded several questions recently centered around the concerns over market volatility. Even though we remind our clients to expect losses every one out of three years (disclaimer: general rule of thumb!), investors are naturally uncomfortable when those losses start to creep in. Inflation, oil prices, unemployment…these are the topics we’re used to focusing on when anticipating market movement. Geopolitical events, although common enough, are a bit different with so many variables in play.
For some historical context, you’ll see a neat summary below that highlights over 20 geopolitical events dating back to the Pearl Harbor attack in 1941. There are a variety of takeaways, but from a macro level, the average drawdown from these events brought a 4.6% decline in the S&P with a full recovery of those losses within 43 trading days (about two months). Take from that what you may.
Not all portfolios are identical, and not everyone’s time horizon or liquidity needs are the same. Every conversation is different. At minimum, what we’re being reminded of, that even after coming off a recent bull market, losses in the stock market are a given. What we need to do, is to use this as an opportunity to review your current investment policy statement to ensure the allocation of your assets are aligned with your long-term goals. If you’re not having that conversation, contact us today.