What 84 years of S&P 500 data says about geopolitical shock — and what it doesn’t
A client brought up a question in a meeting this week. They’d been following the news — conflicts overseas, headlines piling up — and they wanted to know: “Phill, how is this going to affect my portfolio?”
I hear that question more times than I can count. And every time, my answer is the same: let’s look at the data first. Because the data, it turns out, is a lot more reassuring than the news.
Just in case you only have time for the Cliff Notes Summary:
- 84 years of data. 16 conflicts. Of those, 10 produced positive market returns immediately after the event, and 14 produced positive returns over the following year. Only 2 had negative one-year outcomes.
- The worst outcomes weren’t caused by war — they were caused by economics. The Yom Kippur War (−48.2% peak-to-trough) and the Iran-Iraq War were both driven by oil embargoes, stagflation, and Federal Reserve policy — not the conflicts themselves.
- The shorter and more contained the conflict, the faster the recovery. Pearl Harbor: −19.8% to the trough, then +20.3% within one year. 9/11: down 11.6% in the first week, recovered within a month.
- The key question isn’t the conflict — it’s the economics surrounding it. Does this event threaten global energy supply or trigger broad economic disruption? If not, history says markets absorb the shock.
- This conflict was not priced in. That’s contributing to the volatility we’re seeing now. Markets are still working through it.
- Mean reversion is real. Bob Farrell’s Rule #1: markets return to the mean over time. U.S. equity valuations are historically stretched — conflict or not, portfolio construction matters more than predicting headlines.
- The right move is usually staying put — if your portfolio is built for your goals, not for geopolitical forecasting.
Now for the longer version…
I’ve been tracking S&P 500 (“the market”) performance against major military conflicts going back to 1941. Sixteen events. Eight decades. The pattern that emerges isn’t what most investors expect — and in my view, it’s one of the most important things I can share with you right now.
Here’s what this data covers:
- 16 military conflicts from Pearl Harbor (1941) to the Israel–Iran Twelve-Day War (2025)
- Immediate market reactions — from the day of the event through the first 90 days
- One-year outcomes — where markets stood roughly 12 months after each conflict began
- The economic context that actually drove results, separate from the military events themselves
- What the data tells us — and equally important, what it cannot tell us
The First Reaction: Fear, Then Often Something Else
Markets don’t like uncertainty. That’s not a controversial statement. What is surprising is how quickly they tend to recover from it.
Of the 16 conflicts in this data set, 10 produced positive market returns immediately after the event and 6 produced negative returns immediately after the event. Longer term over the next year, 14 events produced positive returns and only 2 events had negative returns. That’s not a coin flip — it tilts meaningfully toward recovery.
Look at some of the most dramatic immediate reactions:
- Pearl Harbor (1941): The S&P 500 dropped 19.8% from the day of the attack to the market trough. Within one year — by December 7, 1942 — it had recovered fully and returned +20.3%. [Slickcharts, S&P 500 Annual Total Returns; Yardeni Research, Bull & Bear Market Tables, 2024]
- Cuban Missile Crisis (1962): A −6.6% peak drawdown during the most dangerous nuclear standoff in U.S. history. One year later, the S&P 500 was up 22.6%. [Slickcharts, S&P 500 Annual Total Returns; iSectors, Geopolitical Shock Events and the U.S. Stock Market, 2022]
- 9/11 (2001): The S&P 500 fell 11.6% in the first week. Within one month, it had recovered +0.6% from pre-attack levels. [Calamos Wealth Management, Geopolitical Events and Market Performance, 2022; Invesco Education Series, Markets in Time of War, 2022]
- Hamas Attacks Israel (2023): Markets barely paused. Three months later, the S&P 500 was up 10%. One year later, up 24%. [Slickcharts, S&P 500 Annual Total Returns; A Wealth of Common Sense, Geopolitics vs. Markets, March 2026]
The Twelve-Day War between Israel and Iran in June 2025 — the most recent event in this data set — saw the S&P 500 drop just 1.0% on the day of the conflict’s start. It rebounded to approximately 6,300 after the swift 12-day conclusion. [Citigroup Research, June 2025; Slickcharts, 2025 total return: +17.88%]
In my view, one pattern stands out above all others: the shorter and more contained the conflict, the faster — and stronger — the market recovery.
The Exceptions That Prove the Rule
Not all conflicts end in market recovery. Two stand apart from the rest — and both carry a specific lesson.
The Yom Kippur War and Oil Embargo (1973)
This is the single worst conflict-linked market event in the data. The S&P dropped 13% in the first 90 days. Peak-to-trough between January 1973 and October 1974, the decline reached 48.2%. [Winthrop Wealth, S&P 500 Bear Markets; Yardeni Research, Bull & Bear Market Tables, 2024]
But here’s what matters: the market didn’t collapse because of the war. It collapsed because of the oil embargo, the resulting stagflation, and a simultaneous recession. Annual returns told the story clearly — 1973 came in at −14.66% and 1974 at −26.47%. [Slickcharts, S&P 500 Total Returns by Year] The war was the trigger. The economics were the damage.
Iran-Iraq War (1980)
The market fell roughly 15% in the initial months. But again, the conflict coincided with existing stagflation and the Volcker rate hikes. The S&P 500’s 1980 full-year return was actually +32.42%. The damage came in 1981 (−4.91%) before the historic recovery off the August 1982 bottom. [Slickcharts; Yardeni Research]
The consistent theme across both of these? The military conflict itself wasn’t the primary market driver. Inflation, monetary policy, and energy prices were.
What 84 Years of Data Actually Tells Us
I want to be careful here. Historical patterns are not predictions. This data cannot tell you what the next conflict will do to your portfolio. What it can do is help you think clearly about the relationship between geopolitical events and investment returns.
Here’s what I observe across the full data set:
- Markets historically recover from military shocks — often faster than investors expect.
- When markets don’t recover, the culprit is usually the economic environment surrounding the conflict, not the conflict itself.
- Anticipated conflicts tend to produce different reactions than surprise attacks. The Iraq War in 2003 saw a +2.4% gain within one month — markets had been pricing in the invasion for months.
- The longer a war drags on without clear economic disruption, the more markets tend to look past it. Vietnam is the clearest example: the S&P 500 returned +27.7% over the eight-year war period. [iSectors, Geopolitical Shock Events and the U.S. Stock Market, 2022]
- What this data does not show: it cannot account for black swan events, nuclear escalation, or conflicts that fundamentally disrupt global trade or energy supply.
There’s one more thing worth saying here — and it has nothing to do with geopolitics.
Bob Farrell spent 45 years at Merrill Lynch studying markets. His first rule is the one I keep coming back to right now: markets tend to return to the mean over time. Every single time. No exceptions.
That means two things simultaneously. First, the resilience in this data is real — markets have repeatedly recovered from conflict and continued higher. Second, current U.S. equity valuations are historically stretched by nearly every measure that matters: price-to-earnings, price-to-sales, and price-to-book. [Rosenberg Research, Revisiting Bob Farrell’s Market Rules to Remember, January 6, 2025]
Mean reversion doesn’t care what triggered the next correction — whether it’s a conflict, a recession, or simply gravity doing its job. It will happen. The question isn’t if, it’s when. And that’s why portfolio construction matters far more than predicting the next headline.
What 84 Years of Data Actually Tells Us
If you’re watching the news and seeing conflict escalate, you’re probably asking: what do I do? I get that question a lot. And honestly, the answer is simpler than you might think. Three things worth asking yourself:
- Does this conflict actually threaten global energy supply or trigger a real economic shock? If it doesn’t, history tells us the market absorbs it. If it does, that’s when diversification — especially strategies that aren’t tied to stocks and bonds — actually earns its keep. Exposure to market neutral strategies can reduce your correlation to equity market swings and provide a real buffer when macro disruption is the driver.
- Was this conflict already baked into prices? I don’t think this military conflict was priced in when it started. That’s actually why we’re still seeing volatility. Markets are still figuring it out.
- Is your portfolio built for your life goals — not for predicting the next geopolitical headline? The answer should be yes. And if it is, staying put is usually the right move.
Times like these are a reminder to stick to your strategy. Markets will always swing between excitement and fear, but your long-term plan is designed to weather both.
The data across 84 years and 16 conflicts tells a consistent story: the market is resilient. It has absorbed Pearl Harbor, the Cuban Missile Crisis, 9/11, and everything in between — and continued higher over time. That doesn’t mean any individual event is risk-free. It means panic is almost never the answer. Staying disciplined, staying diversified, and staying focused on your long-term goals has historically been the right call.
If you have questions about your portfolio in light of current geopolitical events, reach out. I’m happy to walk through it with you using the Dream Decision Framework.
A quick note from the road
Bode and I hit the trails in Lawrence last weekend. It was the first real spring morning — the kind where you remember why you live here. He’s got more gray in his face these days, but don’t let that fool you. Every few minutes he finds a gear that belongs to a much younger dog — full sprint, ears back, absolutely no regard for what came before. I’d say the market could take a lesson from him, but honestly, I’m not sure I could keep up.
I’ll catch you next time.
— Phill
DISCLOSURES
Past performance is not indicative of future results. All S&P 500 annual total returns sourced from Slickcharts (slickcharts.com/sp500/returns), using Robert Shiller/Yale University historical data including reinvested dividends. Additional sources: AAII Journal; Invesco Education Series, Markets in Time of War (2022); Calamos Wealth Management, Geopolitical Events and Market Performance (2022); iSectors, Geopolitical Shock Events and the U.S. Stock Market (2022); Winthrop Wealth, S&P 500 Bear Markets; Yardeni Research, Bull & Bear Market Tables (2024); A Wealth of Common Sense, Geopolitics vs. Markets (March 2026); Citigroup Research Note (June 2025). S&P 500 price data for Bay of Pigs and Lebanon War calculations sourced from Yahoo Finance and Multpl historical data. This newsletter is for informational and educational purposes only. It does not constitute investment advice. All opinions expressed are those of Phill Rademacher, CFP®, and are subject to change without notice. Investing involves risk, including the possible loss of principal. Rademacher Financial, Inc. is a registered investment adviser.
The information presented is believed to be factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of any topics discussed. All investments and investment strategies have the potential for profit or loss. A professional adviser should be consulted before making any investment decisions. All expressions of opinion reflect the judgment of the authors as of the date of the post and are subject to change. We are not responsible for comments made by third parties. Content should not be viewed as an offer to buy or sell any of the securities mentioned, as personalized financial advice, or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.
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