Broker Check

How The Stock Market Reacts To War

February 24, 2022

Russia has invaded Ukraine. President Biden has announced that we will impose strict sanctions for now and will be ready to deploy troops should Russia push into NATO countries. What could happen to the stock market if there is continued aggression and potential war?

Without doing any research, we would think that war isn’t good for anything and in turn when there is war the markets go down. After all, the financial markets hate uncertainty and there is no more uncertain time than war. 

However, in my research, I found that this is a much more complicated answer and isn’t so black and white. 

Below is each war, the timeline of these wars, and the markets return over this time frame.

World War I 1914-1918 - return up 43%

World War II 1939-1945 - up 50%

The Korean War 1950-1953 - up 59%

The Vietnam War 1965-1973 - up 42%

The Cuban Missile Crisis 1962, 13 days - down 1.2%

September 11, 2001 - down 15% in 2 weeks, ended the year down 7%

Invasion of Iraq, 2003 - up 30% that year 

It’s easy to look back on these numbers and try to put together stories from just the results. In every war time, except for The Cuban Missile Crisis and September 11, the markets were positive. 

However, we have to remember that during the day to day in these years there was an immense amount of fear and uncertainty like there is right now. 

I’m sure if we took a time machine back and read some of the headlines coming out of these times, a positive stock market would be the last thing we expected. 

There were days when the market was down big and others when it was up big. Should the current conflict continue, this will be the same. Some days we will be down, others we will be up. 

The best we can do is look back in history, try to learn from it. We see that patience, calmness, and resilience were and are more important than anything else.

Bringing this back to today, for the Ukraine and Russia conflict. It is important we take these same lessons and implement them. That we don’t overreact to any news headlines that will more than likely be negative. We take the calm and resilient approach of taking in all of the information but stay patient in our reactions. 

It’s difficult to say where we will be throughout the conflict. No one truly knows. Every time there is a major event like this, times are different. And with that, it becomes more difficult to put an answer to what we think will be the reaction of people and the stock market.

But, if there is one theme we have seen that we need to take forward it is reiterating what I said earlier. Patience, calmness, and resilience tend to win.