If investors sold out every time there was a war, markets would have about a 200‑year track record of never being invested in. Markets never operate in a vacuum. Headlines compete for attention every day and right now, geopolitics are front and center.
The recent market rally, even with the situation in Iran unresolved, is a reminder that markets are often more resilient than headlines suggest. The market’s strongest days often come shortly after its most difficult ones. Selling out in response to short‑term headlines can mean missing those days, with real consequences for long‑term results.
Geopolitical conflict is unsettling. That reaction is human. From a market perspective, history is fairly consistent:
- Geopolitical conflict often comes with short‑term pullbacks and investor anxiety
- The chart above illustrates that, historically, wars rarely drive long-term market outcomes on their own
Often, the main impact on markets from geopolitical conflict comes from oil prices. That’s why many headlines have focused on the Strait of Hormuz, a narrow shipping lane through which roughly one‑fifth of the world’s oil supply moves. Even without a disruption, fear alone can push oil prices higher. The important context:
- The U.S. relies very little on oil from this route
- Rising prices matter, but the U.S. economy is less vulnerable than many others
Long‑term market challenges are always possible. But history reinforces a familiar reminder: long‑term results depend far more on discipline than on reacting to headlines in real time.
What Really Drives Markets
One of our market strategists, Michael Antonelli, recently shared some insights on some key items that really drive markets:
- Earnings – What are companies saying about their profits, their forward outlooks, and the current state of their business?
- Interest rates – Are interest rates going up or down? Will the Federal Reserve cut rates or hike them at their next meeting? Rates affect everything in the economy.
- Flows – Are people moving money in and out of the stock market in such a way that it affects prices?
- Investor Sentiment – How do people feel about their jobs, their homes, and their prospects for future economic security?
"Now ask yourself: Does the event I’m watching on TV or reading about in the news affect those four things in a meaningful way?
Often, the answer is no."
At Baird, and within our team, we are firm believers that what ultimately drives long‑term market outcomes are forces that receive far less attention in the daily news cycle. These dynamics unfold gradually, often quietly, and rarely show up neatly in headlines.
Short‑term news can impact markets, but long‑term progress tends to be driven by how businesses adapt, invest, and grow through changing environments. This is why discipline, diversification, and staying focused on fundamentals has historically mattered far more than reacting to each new development in real time.
Bringing it all together
- Tough news can trigger fear and anxiety, and that’s normal, but we must separate those emotions from our investing
- Markets tend to be more resilient than headlines suggest
- Short‑term volatility is one of the costs of long‑term growth
- Investors who follow a consistent plan and stay disciplined tend to be far better positioned than those who let headlines dictate their actions.
If recent headlines have raised questions or prompted a desire for perspective, feel free to reach out and we can talk it through together. Schedule a discussion here: https://calendly.com/cquick-rwbaird/ask-anything