A veteran market strategist is unveiling his short and medium-term outlook for the S&P 500 after the United States used military force against Iran.
In a recent blog post, Carson Group chief market strategist Ryan Detrick says he looked at decades of price action, stretching out to 1940, to see how the market reacts after a geopolitical crisis.
According to Detrick, investors typically seek the shelter of safe-haven assets like gold and bonds as the stock market sees short-term volatility and weakness.
Zooming out, the analyst highlights that the S&P 500 usually recovers in just a few months.
“Yes, near-term volatility and potential weakness are common, but as you go out, the returns are more positive—in fact, the S&P 500 is up a median of more than 5% six months later for the events below.”
But Detrick notes that S&P 500 returns following a geopolitical event largely depend on the state of the US economy.
“At the end of the day, some of the poor returns took place during recessions, skewing the data. After John F. Kennedy was tragically assassinated, stocks gained 23% over the next 12 months, thanks in part to a strong economy. A year after the war in Iraq started in 2003, stocks were up nearly 30%, as the economy recovered from the tech bubble. More recently, after Hamas attacked Israel on October 7, 2023, global stocks soared for a year, led by the Israeli stock market.
This is a situation we are watching closely, but the bottom line is that geopolitical issues rarely become major investment issues if the economy is on a solid footing.”
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