Recent headlines have been dominated by unsettling developments in the Middle East – footage of missile strikes lighting up the night skies, long lines of cars fleeing Tehran, and warnings of broader conflict. The scale and seriousness of these events cannot be overstated.
In the wake of a surprise Israeli strike on Iranian nuclear and military targets, Iran fired back with missile attacks of their own. As is so often the case, civilians are bearing the brunt of the conflict. Families are being displaced. Lives are at risk. The human toll is immense – and it is, above all, what matters most.
That said, given our role and the trust people place in us, we are also being asked: What does this mean for my financial future?
While our focus remains on the humanitarian crisis unfolding, we recognize that market uncertainty can add another layer of stress. Investors are understandably concerned. In recent days, we’ve seen sharp movements across asset classes – stocks have stumbled, oil prices have spiked, gold has surged, and market volatility has returned.
It’s not irrational to feel nervous.
Energy markets are particularly vulnerable. A significant portion of the world’s oil supply travels through the Strait of Hormuz, a narrow shipping channel off Iran’s southern coast. Should access to that route be threatened or disrupted, we could see substantial increases in global energy prices.
We’ve seen something like this before. In the 1970s, a Middle East oil shock helped trigger double digit inflation and a brutal market downturn.
But fast forward to today, and things are different.
The U.S. has become a major energy exporter. Global supply chains are more diversified. Financial markets have evolved, with more tools and greater flexibility to respond to shocks.
Still, when geopolitical turmoil dominates the news, it’s natural to feel unsettled. That’s why it helps to take a step back and look at the bigger picture.
Recently, analysts at J.P. Morgan conducted a study of more than 80 years of geopolitical crises. The data reveals a consistent pattern:
- In the first 3 months after a crisis, markets often dip.
- But after 6 to 12 months, markets tend to recover back in line with long-term averages.
Of course, past performance does not guarantee future results. But this historical perspective offers a valuable reminder: while markets react quickly to global events, they often stabilize just as quickly.
So, if short-term headlines aren’t the main drivers of long-term returns, what is?
- Earnings: When companies grow profits, their stock values usually rise. Last quarter, companies in the S&P 500 reported earnings jumped 12% over last year.
- Consumer Confidence: When people feel good about their jobs and finances, they tend to spend more. That spending supports businesses and drives the economy. Lately, consumer confidence has been rising, giving markets another reason to stay resilient.
- Interest Rates: When borrowing gets more expensive, growth can be slow. But if rates stay stable or drop, it opens the door for companies and consumers to spend more. Right now, central banks are playing it cautious and holding steady.
- Inflation: Runaway inflation can hurt everyone. But when it’s under control, it creates a solid foundation for growth. The good news? Inflation has cooled since the pandemic spike. The last reading suggests that prices are stable.
Events like these weigh on all of us – both as human beings concerned about global stability and as investors worried about our financial future.
If your portfolio is built around your goals and properly diversified, it’s designed for moments like this.
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Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
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