Source: Deutsche Bank
In general, equity market reaction to geopolitical events tends to be a quick pullback that lasts a few weeks followed by a fairly quick bounce back to prior market levels. Admittedly averages mask outliers, and the impact from current events is unlikely to converge on the averages of past events. The goal of sharing this data is not to downplay the current situation, rather it is to provide background that we live in a world in which we unfortunately are not experiencing our first geopolitical conflict. One common thread throughout many of the events in the table, and the current environment, is that the end of the conflict is unknowable in the middle of the event. This uncertainty breeds fear, which causes increased market volatility.
A Wall Street Journal article from a few weeks ago included a noteworthy quote. During a speech in 1963, Benjamin Graham, author of The Intelligent Investor and regarded as the father of value investing, said, “In my nearly 50 years of experience in Wall Street I’ve found that I know less and less about what the stock market is going to do, but I know more and more about what investors ought to do.” This quote speaks volumes about remaining disciplined and unemotional when investing. Selling at a time of fear and waiting for the environment to feel better rarely results in a positive impact to portfolio returns.
We have stayed disciplined while attempting to be opportunistic across our portfolios during current market volatility. We will share more details about our portfolio movements during our first quarter update early next month.
