The S&P 500 (^GSPC 0.94%) fell 0.95% to 6,816.59, the Nasdaq Composite (^IXIC 1.02%) lost 1.02% to 22,516.69, and the Dow Jones Industrial Average (^DJI 0.83%) slid 0.83% to 48,501.28 after an oil‑driven, geopolitics‑fueled sell‑off partially retraced from deeper intraday lows.
Market movers
Energy‑sensitive travel and airline names, including major U.S. carriers, sank as soaring jet‑fuel costs and Middle East route disruptions pressured sentiment, while perceived defensive stalwart Berkshire Hathaway and defense contractor Lockheed Martin held up relatively better amid heightened war‑related spending expectations.
What this means for investors
While market-wide drops like today’s can be anxiety-inducing, it is paramount for investors to step back and look at the long term.
Yes, the market faces significant headwinds as the U.S.-Israel-Iran conflict drives surging oil and gas prices and disrupts shipping through the Strait of Hormuz. The heightened geopolitical risk triggered a global sell-off, with South Korea’s Kospi dropping 7% and the S&P 500 turning negative year-to-date. A prolonged conflict could further pressure markets by reigniting inflation and forcing interest rates higher.
That said, in these times, I believe it is best to look back at history to provide some guidance on what we might face as long-term investors. A perfect example of this guidance came from Ryan Detrick, Carson Group’s Chief Market Strategist (and recent Motley Fool Money podcast guest).
He analyzed 43 geopolitical and major historical events the U.S. faced from 1940 onward. He found that the median return of the S&P 500 was 5.3% just six months after these events. In fact, the market was higher 65% of the time in the year following the events. Despite facing these trying times, the market essentially went up two in every three years.
Oddly enough, this percentage basically matches the figure from one of The Motley Fool’s co-founder, David Gardner’s nine self-evident Foolish truths: “two years out of three, the market rises.”
No, things aren’t perfect right now. But don’t let short-term volatility interrupt your long-term compounding.
Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
