Stay the course: Market returns after geopolitical events

In times of geopolitical unrest, it can be scary to watch numbers swing up and down in the stock market. Fortunately, though, we can look back at similar events in our history and see that most often, the best course of action may be taking no action at all. So what does that mean for us today?

In the aftermath of Russia’s invasion of Ukraine, markets are likely to experience increased volatility as a flight to safety takes hold. This may result in the temporary reduction of equity valuations while pushing investment-grade fixed income and commodity prices higher. With history as our guide, we anticipate any market disruptions to be relatively short-lived. In fact, an analysis done by Goldman Sachs over the last 30 years indicates that markets generally move higher within three months of a geopolitical shock.

While market prices may decline, fundamental value is likely to remain intact given that Russia and Ukraine account for about 3.0% and 0.4% of global gross domestic product, respectively. Geopolitical events like these can understandably be a little overwhelming, making you feel like things are out of control. Nevertheless, financial markets are incredibly resilient, so we recommend you sit tight, take a breath, and stay the course.