March Market Insight
If the headlines this month feel heavier than usual, you’re not wrong. The outbreak of military conflict between the United States and Iran has understandably shaken investor confidence and introduced a level of uncertainty that can feel deeply personal — both as citizens and as people with financial plans built for the long term. Moments like these test the resolve of even the most experienced investors.
But here is what history consistently tells us: discipline wins. Not timing. Not reacting. Not retreating to the sidelines. Over more than a century of market data — through two World Wars, the Korean War, Vietnam, the Gulf War, 9/11, and the Russia-Ukraine conflict — the pattern has been remarkably consistent. Markets absorb geopolitical shocks, volatility spikes, fear dominates the conversation… and then recovery follows. The companies that drive the S&P 500 — the Apples, the Microsofts, the UnitedHealths of the world — do not fade because of armed conflict. They adapt, innovate, and continue to generate earnings. And earnings, not war, are what ultimately drive stock prices.
This month’s Insight draws from two research-backed perspectives on war and financial markets. As always, our focus remains on positioning your portfolio with diversification and discipline — strategies specifically designed to create benefits in risk-on environments and to weather exactly the kind of uncertainty we’re seeing today. Periods of fear often produce opportunity, and we want to make sure you’re prepared to capture it.
How Does War Affect the Stock Market? A Historical Analysis
LiteFinance examines over a century of data on how military conflicts have impacted equity markets around the world. The central finding is one that may surprise investors caught up in today’s news cycle: there is no clear, reliable correlation between wartime events and long-term stock market performance. While markets almost always experience a spike in volatility at the onset of hostilities — as investors rush toward safe-haven assets like gold and cash — those initial sell-offs have historically been short-lived, particularly when the conflict remained geographically contained. The U.S. market, in particular, has shown a pattern of temporary correction followed by relatively rapid recovery. The analysis also highlights that shares of specific industries in non-combatant countries often appreciate during conflict, and that the broader U.S. indices tend to react more sharply to trade wars and global crises than to regional military engagements.
Why it Matters
Geopolitics, War, and Markets: The Case for Staying Invested
Fidelity Investments provides a rigorous historical analysis of U.S. stock market performance during periods when the country has threatened or used military force abroad — and arrives at a clear conclusion: there has been little meaningful relationship between war and long-term market performance. The most important driver of stock prices, the article argues, remains corporate earnings — and wars have rarely disrupted the ability of most large U.S. companies to generate them. The analysis points to the Russia-Ukraine conflict as a powerful example: despite a devastating and ongoing war between two significant global commodity exporters, the S&P 500 has risen by more than 60% since that conflict began. Fidelity’s research also cautions against the emotional impulse to sell into fear, noting that some of the best single days in market history have occurred during bear markets. Retreating to cash in response to geopolitical headlines has historically been a costly decision.
Why it Matters
This research reinforces a core principle of our approach: diversification is your best defense during geopolitical uncertainty. Fidelity’s own portfolio managers note that a well-diversified portfolio generally carries very little direct exposure to any single area of conflict — and that level of diversification provides peace of mind while keeping investors positioned for long-term growth. According to Hartford Funds, stocks have delivered positive performance one year after an act of aggression in 73% of armed conflicts since World War II — and the longer the investment horizon, the more likely a positive outcome. The data is clear: fear gives way to recovery, and the companies that make up the largest constituents of the S&P 500 do not fade with conflict. They endure.
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