Sticking to Your Investment Strategy in Times of Crisis
In times of world crisis, some investors hit the panic button a bit too early and totally changing their investment strategy. Recently, we’ve been getting a lot of questions about how the military conflict between the United States and Iran would affect the stock market. The truth is, it has barely made an impact at all and we don’t expect anything too drastic in the near future as tensions seem to be easing.
What Happened?
In case you’ve been living under a rock, an American drone strike killed a prominent Iranian military commander and that has escalated tensions in the Middle East significantly. It may even lead to another war. If that happens, then we may need to revisit this topic. As of now, there is still so much uncertainty that most investors are standing pat and going about business as usual.
This Iranian conflict is a different situation than with China in 2019. That was a trade war imposing major tariffs and restrictions on Chinese goods. Of course, that was going to hurt the stock market (at least temporarily). This military conflict has less tangible impact on the financial market directly. Crude oil prices did spike after the initial attack, which is understandable. However, most markets didn’t tumble like some people might have feared.
Looking at the Numbers
In fact, the benchmark S&P 500 dropped by only 0.7% the day after the air strike on January 2. It then rebounded 0.4% the following day. It has gone up and down a little both ways since then, but nothing out of the ordinary for the stock market.
“If 2019 taught us anything, it’s that you have to try as best as possible to keep to your process and not get caught up in the headlines,” says Todd Sohn, technical analyst for Strategas in an interview for the Washington Post. “I wonder if the market has learned to discount these events.”
We live in an age where there is a lot of uncertainty and there are major headlines every day. It’s kind of interesting to see how the stock market does or doesn’t react like it once would. Escalation in the Iran conflict (including war) would likely have more of an effect on the stock market. Right now, things are too uncertain to panic. That doesn’t mean you should completely ignore this situation, though.
Sticking to Your Investment Plan
Most of our clients are sticking to their investment plans. It’s important to remember that we are financial advisors helping people to build long-term financial plans with diverse portfolios and. Our investment strategies are an extension of this, so the investments are built to withstand the natural ebbs and flows of the market. If you are worried about any stocks or bonds that could be directly affected by an escalating military conflict, then talk with your financial advisor and have strategies in place to deal with any sudden changes in the marketplace.
This is what having a good investment plan and a professional financial strategist on your side is all about. You’ll be able to make both short- and long-term moves to grow your wealth and put yourself in the best possible position for an early retirement.
For proven financial advice and investment guidance through the good times and bad, contact Illumination Wealth today for a no-obligation personal consultation.