Stock Market Reaction to War and Crisis Events
Stock markets around the world have been falling in recent days as uncertainty grows around a potential Russian invasion of Ukraine. We don’t want to be insensitive when the possibility of war is on the table, but we thought it may help investors to take a look at how historical geopolitical crises have impacted stocks. Market reactions to war and crisis events can be tricky and hard to quantify. It is important to remember that each one is different, happening under different market and economic conditions with different factors at play. If we look at past market reactions, you will see that returns differed by event but were largely unaffected.

- From the start of World War I in 1914 until the war ended in late 1918, the Dow was up more than 43% in total or around 8.7% annually.
- World War II had a similarly counterintuitive market outcome. From the start of WWII in 1939 until it ended in late 1945, the Dow was up a total of 50%, more than 7% per year. So, during two of the worst wars in modern history, the U.S. stock market was up around 100%.
- The Korean War began in the summer of 1950 and ended in the summer of 1953. In that time, the Dow was up an annualized 16%, or almost 60% in total.
- U.S. troops were sent to Vietnam in March of 1965. The Dow would finish the remainder of that year up almost 10%. By the time the last of the U.S. troops were pulled out of Vietnam in 1973, the stock market was up a total of almost 43% in that time, or just under 5% per year.
- The Cuban Missile Crisis had the world on the brink of nuclear war in October of 1962 when the U.S. faced a standoff against Russia. The confrontation lasted 13 days. In that two-week period, the Dow remained surprisingly calm, losing just 1.2%. For the remainder of that year, the Dow would gain more than 10%.