Using Historical Data to Show How Geopolitical Conflicts Have Affected Markets in the Past
February 23, 2022
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Darrin Cohen, and I am the CEO of Wealth E&P.
Last week was another down week in the markets, being down anywhere between 1.5% to 2% across the three major indices. The focus on our minds right now is on inflation and interest rates. Of course, the Russia and Ukraine conflict is in the news and getting a lot of attention right now. I want to address that fairly quickly with some historical data.
As you can see here, there are 21 geopolitical risks in history, stemming all the way back to the Pearl Harbor attack in 1941. Across the board, what you’ll notice is that in most cases, it is a short downturn with a fairly quick recovery. On average, the complete downturn is about 5%. It takes about 22 days to hit that bottom point, which means we start to recover around 3 weeks out on average. Usually, we have a full recovery at about a month and a half out.
While we are obviously very concerned for the people in those regions and all of the lives that are at risk, we don’t want to be as concerned about the impact on the market. I always say that the real impact on the market is fundamental economics. We still have a strong economy in corporate America and in our personal lives, however, we do have a strong watch on inflation and interest rates to see what kind of impact that will have on the economy.
We have certainly de-risked in our portfolios; our indicators have told us to go to a more moderate level in our All-Weather scoring. What this means is: we’re kind of at an inflection point; we want to see if this will be a rebound and quick recovery or if we do break through and see some more losses. We do think it’s prudent to be in this moderate position, and more importantly, the indicators are telling us to do just that.
If you have any other questions on this or anything else, if you want a risk profile, or if you would like a retirement projection, please feel free to reach out or visit www.wealthep.com. Otherwise, stay tuned for our Market Minute next week!
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