Across major geopolitical shocks since WWII:
- Initial selloff: ~3% to 10%
- Bottom reached: often within days to weeks
- Recovery: usually within 1–3 months
- 12-month forward returns: typically in-line with historic averages
Markets react quickly because:
• uncertainty spikes
• risk premia temporarily expand
• liquidity demand rises
But unless the event changes economic capacity, the effect fades. We can think of it this way, too:
Markets price:
➡️ earnings
➡️ productivity
➡️ liquidity
—NOT headlines.
Here is a chart that spans 36 major global military actions dating back to Germany’s invasion of France in 1940 up through the invasion of Ukraine by Russia in 2022 and gives shape to this dynamic:
Because of this historical tendency and other factors, the Piton Investment Team believes it is better to analyze the consequences of a geopolitical event (such as the recent renewal of military action in and around Iran) for a time before committing to any investment changes as a result of the event.
Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.
The S&P 500® Index, or the Standard & Poor’s 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.