In a brief, televised address at 5 a.m. local time (last night in the U.S.), the Russian president announced a “special military operation” in the east of Ukraine.
Minutes later, Russian cruise missiles, artillery, and air strikes hit cities, military bases, and border spots across Ukraine’s vast territory.
CCTV footage also shows Russian tanks entering the country from neighboring Belarus.
Today, I (Chris Lowe) was planning to dive back into the electric vehicle boom colleague Dave Forest sees coming… and how you can profit.
But given the scale of Russia’s assault on Ukraine – and the fears it’s generated among investors – I’m pausing that.
Instead, I’m shining a light on how stocks tend to perform in times of war. Because apart from the obvious human tragedy here… this is also something we have to think about as investors.
As you’ll see, stocks tend to weather wars much better than the fearmongers in the mainstream press would have you believe.
The Nikkei in Japan fell 3.6% for the day. And the main index in India dropped nearly 5%.
Then, this wave of selling pressure washed over Europe.
Germany’s and France’s main indexes each plunged by about 4%.
U.S. stocks had a volatile session, too. The Dow fell nearly 3% before recovering its losses and ending in the green.
It’s natural to worry about these nasty declines. But history teaches us to stay calm… and stay invested.
It raged between July 1914 and November 1918.
And it was one of the worst wars of all time.
Armies from more than 20 countries – including the U.S. – battled across Europe, Africa, Asia, the Middle East, and the Pacific Islands.
The fighting took the lives of about 10 million combatants… and another 10 million civilians.
You’d expect stocks to have dived… and kept diving.
But figures from Ben Carlson at Ritholtz Wealth Management reveal that, after an initial plunge of 30% in 1914, the Dow rose more than 88% in 1915.
And over the roughly four years the war lasted, it rose 43%.
Hitler started the war by invading Poland on September 1, 1939. The next day, the Dow soared 10%.
Two years later, the Imperial Japanese Navy attacked U.S. ships and sailors at Pearl Harbor on December 7.
The following day, when the U.S. entered the war, the Dow dropped about 3%. But it regained those losses the next month.
And over the course of the whole war, the Dow rose 50%.
The other big wars of the 20th century involving the U.S. were in Korea between 1950 and 1953… and in Vietnam between 1965 (when the first U.S. combat troops arrived) and 1973.
During the Korean War, the Dow rose 60%. And during the Vietnam War, it rose 43%.
I remember it well.
September 11, 2001, was my first day on the job at financial newswire company Reuters. My office was in the City of London, England’s equivalent of Wall Street.
I was 25 years old. And I was unpacking boxes at my desk when the planes slammed into the World Trade Center.
Once it was clear it was a terrorist attack, security staff evacuated everyone from our building. The fear in those moments was that terrorists were about to attack other major financial centers, too. Fortunately, that didn’t happen.
The Dow fell 15% over the next two weeks. But it recovered those losses just a couple of months after the attacks.
But my beat here at the Cut is the markets. My mission is to help you grow and protect your wealth by looking behind the headlines in the mainstream press.
And the lesson from history is clear: Acting on the negative headlines in times like this is bad for your wealth.
So my advice to you remains the same as it’s been through all the volatility we’ve had in 2022: Sit tight and do nothing.
Volatility like today’s is a feature, not a bug, of the stock market. The only way to earn the truly life-changing gains on offer is to weather these trying times.
If you can hold on through the bumps along the way, you’ll look back in the coming years from a position of comfort and wealth instead of regret.
Regards,
Chris Lowe
February 24, 2022