Today let’s consider the impact of global conflicts on the stock market. Here is a table from Goldman Sachs looking back 80 years to Pearl Harbor.
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In the Crimea Conflict and Kosovo War, the S&P 500 didn’t have any correction at all.
In the other 8 conflicts, the S&P 500 suffered downdrafts with 4 instances of double-digit declines.
It is worth noting that the Fed is set to hike interest rates for the first time so they are in a tightening stance. In the 4 conflicts where the Fed was tightening, the S&P 500 was up 30-days later in 3 of the 4 instances.
War is just one factor to look at when considering investment risk and can’t be looked at in a vacuum. There are many other variables to consider.
At Runnymede, we had a bearish bias back in January because of an increasingly hawkish Fed and sharply decelerating growth coming in the 2nd quarter of 2022. The war has pushed oil prices above $100/barrel, a level that we haven't seen since 2008. This will further hurt growth as consumers have less money for discretionary spending.
Buckle your seatbelt because it could be a bumpy ride ahead.
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Feature image from Unsplash
