NEW YORK — A sudden flare-up in Middle East violence sent U.S. equity benchmarks lower at Monday’s open, but market historians say investors who resist the urge to dump stocks during wartime scares have generally been rewarded for their patience.
The Dow Jones Industrial Average slipped 0.4% and the S&P 500 lost about 0.5% in early trading after news reports of widening strikes near the Israel-Gaza border. Energy issues were the lone bright spot as Brent crude rose past $90 a barrel.
“Selling into the initial headlines has rarely been the right move,” said Daniel Tucci, senior strategist at Caliber Investments. Tucci pointed to data showing the S&P 500 has advanced a median 6% in the six months following 14 major geopolitical shocks since 1990, including the first Gulf War, the September 11 attacks and Russia’s 2022 invasion of Ukraine.
A study by market-analytics firm CFRA reached a similar conclusion. According to its figures, U.S. large-cap shares were higher one year after a crisis in 12 of the past 15 instances, averaging a 13% gain. “The market’s attention typically shifts back to earnings and monetary policy much faster than investors expect,” CFRA chief investment officer Sam Stovall noted in a briefing.
Still, volatility can be painful in the short run. The S&P 500 fell more than 11% in the month after Russia crossed into Ukraine before rebounding to new highs ten weeks later. “You need a stomach for drawdowns,” warned Alicia Wang, portfolio manager at Redwood Partners. “But if your time horizon is measured in years, not days, history is on your side.”
Federal Reserve officials, speaking on background, said they are monitoring crude prices for signs of spillover inflation but gave no indication the latest turmoil would alter the central bank’s rate path. Futures traders continued to price in a roughly 70% chance the Fed will leave its benchmark rate unchanged at the May meeting, according to CME’s FedWatch tool.
Looking ahead, analysts say earnings season rather than geopolitics is likely to set the market’s tone. FactSet expects S&P 500 companies to post 3.2% year-over-year profit growth in the first quarter, the strongest advance since late 2022. “If results beat already muted expectations, the tape could firm up quickly,” said Tucci.
For retail investors unnerved by the headlines, Wang recommends rebalancing rather than retreating. “Check your allocation, harvest some tax losses if you must, but think twice before making wholesale changes. The historical record is crystal clear: panic selling during shooting wars has rarely ended well.”