Even so, long-term investors with diversified portfolios of stocks and high-quality bonds – held directly or through low-cost mutual funds and exchange-traded funds – are likely to pass this crisis, as they have done so many others.
While stocks typically fall amid global uncertainty, US Treasuries tend to rebound as investors seek shelter and push their prices up. Bond prices and yields move in opposite directions, and as interest rates are rising, Treasuries have fallen in value this year. But during a major stock downturn, they often provide a short-term buffer to the portfolios that contain them.
Weathering the storm in the stock market is a good long-term strategy. A year after the bombing of Pearl Harbor in 1941, the S&P 500 was up 15%. A year after the US invasion of Iraq in 2003, that number increased by 35 percent. History shows that just a year after most of the crises hit the stock market, the S&P 500 stock index rallied.
Stock markets during the Cold War
Russia’s hostile actions in Ukraine could be the start of something much bigger: a geopolitical shift that plunges the world into a 21st-century version of the Cold War. But even if that were the case, the hard numbers suggest the financial impact on conservative, diversified investors who live far from the immediate danger zones may not be so severe.
The Cold War was destructive and debilitating for a large population, but it was a great time for stock investors. Even in times of recession and regional wars, the Dow Jones Industrial Average has performed brilliantly.
Here are the numbers I calculated over the long Presidents Day weekend:
Since President Truman’s March 17, 1948, stated before Congress criticizing what he called the Soviet expansion of Communism in Eastern Europe, until December 31, 1991, when the Soviet Union ceased to exist, the Dow fell back to 10 0.05%, year-on-year. In the roughly 30 years since, through Friday, the Dow is back 10.77%, year-over-year, slightly better than it was during the Cold War, but not by much.
https://www.nytimes.com/2022/02/22/business/russia-ukraine-markets.html Russia-Ukraine crisis shakes markets, but long-term outlook is better