How Geopolitical Conflict Impacts the Stock Market (And What Long‑Term Investors Should Know)

Erin: Jordan, so good to see you. We’re going to dive into the headlines today. Talk about markets and geopolitics with the question: When will stocks recover? Rising tensions in Iran have pushed oil prices higher and created short term volatility in the markets. Historically, however, geopolitical conflicts tend to have only a temporary impact on stocks. So let’s see what that looks like. Here is the S&P 500’s one month performance. Yikes. A lot of red on the board. So, Jordan why do we tend to see stocks fall first when tensions rise.

Jordan: Yeah. First when we look at that it’s kind of scary for a lot of people. There’s a lot of uncertainty. And going back to the markets the markets do not like uncertainty. So when there’s uncertainty when people don’t know what the next few days are going to result in, there’s a lot of pullbacks and there’s a lot of negative, as we’ve seen in the last 30 days. And that has really drawn back this market and really created a lot of volatility in today’s market with that uncertainty that the market really hates.

Erin: Okay, so let’s take a look at the data, which I know you love to do. History shows the S&P usually recovers quickly from geopolitical events. So here’s a look at several events. And as you can see it’s mostly short shallow pullbacks. Explain what we’re looking at please.

Jordan: Yeah. And history doesn’t always repeat itself, but it usually does rhyme. And we use that data to make educated wise decisions. So, when we look at these conflicts that have occurred over the last few decades, most of them have just been short term volatility, usually 100 days or less. And most of them usually are about a 10% pullback. So, take that into perspective. Yes, we expect volatility. Yes, we expect that the next maybe three months from a conflict starting. But in the long scheme of things and having a plan and people’s long-term horizon, it’s not something we want to make knee jerk decisions on or make emotional decisions on either.

Erin: For investors then watching these headlines and rising oil prices, what’s the most important perspective we should keep in mind before making portfolio decisions?

Jordan: Yeah, the headlines are meant to scare you. Your advisors should be there to give you confidence and clarity and not scare you. But when you have an advisor, hopefully they’re not just managing your investments, they’re giving you a plan. A plan that you know, hey, not only now, but for five, ten, thirty years in the future, you’re going to be okay. And when you have a plan, these short-term bumps in the road or these market pullbacks, they’re really not going to impact you. So, you don’t want to get emotional. You don’t want to look at the headlines. You want to look at your plan. Your advisor should already be calling you already reaching out. But if they’re not you should reach out to them. Or better yet, you should reach out to us, and we can help give you that confidence and clarity that you deserve, right?

Erin: Boy, I would love to spend an hour on your answer just now, but you mentioned so many important points, including when you have that financial plan, you don’t make emotional decisions. Can you just walk us through how emotional investing tends to lead to bad financial decisions?

Jordan: Yeah. And the secret of the market is not timing the market, not buying low and selling high, but it’s really time in the market. And this chart, we got that emotional roller coaster because as human beings, whether we think we’re not, but we really are. We’re all emotional and a lot of us can sometimes use that to dictate our decisions. Where we buy at the very worst time, you know, or we sell at the very worst time. But basically, this emotional cycle is going to happen. So, we need to make sure we look at the plan, look at where we’re at. Hopefully you have your money divided into buckets where you have some money for short term needs, some money for maybe more medium term needs and maybe money for more long term needs. And when you have that plan and you have different buckets for different assets, then you don’t really care about the short-term volatility. And we believe strongly that money is a tool to help you live your life. Money is not something you want to wake up every morning and be stressed out if the markets are down or not. Be able to do things you love, but money should help you accomplish your purpose and your goals. So don’t let the headlines scare you. Don’t get emotional. Line everything back up to that plan so you can have that confidence and clarity.

Erin: Yeah. Well said. So, Jordan, as you mentioned, if somebody doesn’t have that plan or perhaps, they have some sort of a plan, but they’re still feeling stressed by it. That means it needs to be fine-tuned according to their risk tolerance. What’s the best way to reach you to talk that through?

Jordan: Yeah, just a quick story. We had somebody showed me their plan, which really was a reinstatement of their current asset value, and they were charged $7,500. It was insane. We’ll review what you have or create something for you. Complimentary. Our goal is to provide you value, provide you leadership, and truly help you. To call us to start that process: It’s 847-499-3454 and we can get together, understand your goals, understand where you want to go, and then craft a plan or maybe revise or upgrade your plan so you can sleep good at night and enjoy life. Even if there’s a lot of uncertainty in the world today.

Erin: Yeah. Well said. It all comes back to peace of mind. Jordan, thank you for your time right now. And everybody standby for a QR code at the end as well. Thank you.

Jordan: Thanks, Erin.