War and Peace

The Ukraine war rolls on, and the Middle East battle is raging. The urge to sell your stocks may be strong, but is this the best option? We have received several client calls regarding the growing conflicts, so let's examine the previous wars to see how the S&P 500 Index fared during the dark days.

My heart aches for the innocent victims, and life is more valuable than dollars and cents. I struggle to understand the hatred towards other people and nations and constantly pray for peace.

World War II. The Second World War occurred from 1939 to 1945, and the S&P 500 Index averaged a 10.1% annual return during this six-year war. The market declined 9.8% in 1940 and 11.6% in 1941. The one-month T-Bill averaged 0.2%, and long-term bonds averaged 4.5%.

Korea. The Korean War happened from 1950 to 1953, and the stock market averaged a 17.9% annual return. The stock market was down 1% in 1953. The one-month T-Bill averaged 1.5%, and long-term bonds averaged 0.2%.

Vietnam. The Vietnam War lasted twenty years, from 1955 to 1975, and during this war, the stock market generated an average annual return of 8.2%. The market fell in 1957, 1962, 1966, 1969, 1973, and 1974. The worst decline occurred in 1974 when it dropped 26.5%. The one-month T-Bill averaged 4.1%, and long-term bonds averaged 2.3%.

Cuban Missile Crisis. The Cuban Missile Crisis occurred in October 1962, and stocks fell 8.7%. However, they rose 26.9% in 1961, followed by a gain of 22.8% in 1963. The one-month T-Bill averaged 2.7%, and long-term bonds averaged 6.9%.

Persian Gulf War. This war lasted from 1990 to 1991. The S&P 500 fell 3.1% in 1990 and jumped 30.5% in 1991. The one-month T-Bill averaged 6.7%, and long-term bonds averaged 12.6%.

Afghanistan. The Afghanistan War lasted twenty years, from 2001 to 2021. The stock market averaged  8.4% annually during this conflict but fell in 2000, 2001, 2002, 2008, and 2018. The one-month T-Bill averaged 1.3%, and long-term bonds averaged 6.3%.

Iraq War. The Iraq War lasted from 2003 to 2011, and the stock market averaged 7.1 yearly. The market lost one year in 2008 when it fell 37%. The one-month T-Bill averaged 1.8%, and long-term bonds averaged 8.4%.

You may say I'm a dreamer, But I'm not the only one; I hope someday you'll join us, And the world will be as one.  ~ John Lennon

November 8, 2023

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren't suitable for every investor. Prices and yields are for today only and are subject to change without notice. Past performance is not a guarantee of future performance.

Data source: Dimensional Fund Advisors 2022 Matrix Book.