Stocks and Geopolitical Crisis Events

Stocks and Geopolitical Crisis Events

October 12, 2023

As you may have seen in the news, Israel is at war with Hamas. In this post, we take a look back at about two dozen historical geopolitical crises, including wars and terrorist attacks, for some perspective on how markets might perform.

  • The average one-day return at the onset of the geopolitical events we looked at is -1.1%. That makes the S&P 500’s 0.3% gain on Monday (10/9), unusual, as a positive one-day return only occurred four out of the 23 events we studied.
  • Around prior geopolitical events, the average drawdown is -4.7%, the average time to reach market bottom is 19 days, and the average time to fully recover losses is 42 days.
  • In other words, equities have historically held up well during geopolitical shocks, including wars and other military conflicts going back decades. Even the market recovery from 9/11 took only 31 days.
  • Besides the severity of the event, whether the event coincides with recession has been a main determinant of market performance.
  • For more details on how stocks have historically performed after major geopolitical crises, click HERE.

 Source: LPL Research 


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