The Influence of Global Conflict on Stock Market Performance

What happens to the stock market if we go to war?

The world is growing more hostile by the day, with rises in violence and volatility from Ukraine and Gaza to Yemen and Sudan. As humanitarian crises and ticking nuclear threats brew, the surging conflicts leave investors worried about the fate of the stock market. So, what happens to the stock market if we go to war? Today's article will cover the historical performance of the stock market during global conflict, as well as the potential influence on individual sectors of the market.

The ongoing wars that could draw in the United States

The United States, as the leading NATO country, has worn the mantle of a global police force tasked with maintaining balance and limiting conflicts. The past couple of decades have been generally described as the most peaceful time in history, but the times are seemingly changing.

• Several ongoing armed conflicts in the world
• US involvement in Russia-Ukraine and Israel-Gaza conflicts
• Possibility of direct American involvement in conflicts

What happens to the stock market in a war?

While the pre-conflict period and first reaction to war do tend to initiate a stock sell-off and increase demand for hedges like gold, bonds, and stable foreign currency, the stock market quickly recovers from the initial volatility of war as the conflict stabilizes.

LPL Financial Chief Investment Strategist John Lynch has stated that conflict is unlikely to seriously affect the United States market performance. The Dow during World War II experienced growth despite the global crisis.

Do stocks do well during war?

Individual stocks can face significant impact from global conflict. Certain industry sectors like travel, transportation, and leisure suffer more during wars, while defense and energy stocks tend to benefit.

The stock market may experience a short-term increase in volatility during war but has historically recovered long-term.

The central bank may intervene to preserve the economy during times of conflict.

What happens to the stock market if we go to war – the bottom line

Despite the seriousness of wars, the stock market tends to quickly stabilize and may even benefit from conflicts in the long run. Investors are advised not to react impulsively to geopolitical events, and the central bank may step in to maintain economic stability.

Remember, investing is speculative, and your capital is at risk.