The uncertainty of war leads to fear and doubt, states Bob Lang of ExplosiveOptions.net.
Indiscriminate selling ensues, market action turns bearish, and our long-term investments—like 401(k) plans and retirement accounts—take a beating. Without any guidance, we are left to wander aimlessly or just sit on the sidelines and watch.
We are currently experienced a sharp dip in the markets. This “darkness before the dawn” often precedes a surge higher. As painful as it is in the short-term, history sides with the bulls. Over the last 100+ years, the stock market has risen sharply following war.
After WWII, markets rose for a bit, suffered through a prolonged correction for a few years and then rose sharply from 1949 until 1966, when a bear market established itself. Gains during that period were stellar.
Following the Vietnam War, inflation and higher gas prices were a problem for about six years. Then the stock market boomed from 1982 until 2000, gaining nearly 500% during that period. That’s an average annual return of more than 27%.
During the war in Afghanistan, the stock market weathered swings in both directions. If you strapped in and stayed for the duration, your accounts are sharply higher. The S&P 500 (SPX) was up more than 300% during that stretch, an average gain of 15% per year. Historical average annual returns are about half that number.
Hopefully this current war resolves soon. Until then, keep history in mind. We are in a bear market, which is very difficult to trade. A bull market is sure to come again; just be patient and wait it out.
Learn more about Bob Lang at ExplosiveOptions.net.