Market Volatility During and After War: What History Teaches Long-Term Investors
When military conflicts dominate the headlines, market volatility often follows. Investors naturally ask the same question: What does this mean for my portfolio?
History suggests a clear answer. While wars and geopolitical shocks can unsettle markets in the short term, their long‑term impact on diversified equity portfolios has historically been far less damaging than feared.
A comprehensive study by Hartford Funds, reviewing every major military conflict since World War II, offers valuable perspective for investors navigating today’s uncertainty. [Hartford M...s 3.8.2026 | PDF]
Short‑Term Turbulence Is Common
Markets dislike uncertainty. In the early stages of conflict, investors react emotionally to unknown outcomes, supply‑chain disruptions, and economic dislocation.
Hartford’s analysis shows that three months after the start of a military conflict, market returns are often mixed and frequently negative. In fact, fewer than half of the conflicts studied produced positive market returns in that initial period. [Hartford M...s 3.8.2026 | PDF]
Examples include:
- Germany’s invasion of France in 1940
- The Arab oil embargo of 1973
- Russia’s invasion of Georgia in 2008
In each case, markets experienced short‑term declines as investors processed rapidly changing conditions.
Longer‑Term Results Tell a Different Story
As time passes and uncertainty fades, markets tend to recover. According to Hartford’s data:
- One year after the onset of a conflict, markets were positive roughly 73% of the time
- Three years later, 86% of periods showed positive returns
- Five years later, 95% were positive
- Ten years later, every historical instance studied produced positive returns [Hartford M...s 3.8.2026 | PDF]
Median annualized returns over these longer periods clustered near the long‑term historical average of equities—roughly 9–10% per year.
Notably, even conflicts that coincided with sharp early losses—such as Pearl Harbor, the Cuban Missile Crisis, and the Iraq War—were followed by solid long‑term market gains. [Hartford M...s 3.8.2026 | PDF]
The Power of Staying Invested
One of the most striking visuals in the Hartford research tracks the growth of a hypothetical $10,000 investment in the S&P 500 from 1940 through 2025. That single investment grows to approximately $5.5 million, despite decades marked by wars, terrorist attacks, energy crises, and geopolitical instability. [Hartford M...s 3.8.2026 | PDF]
The lesson is not that wars are “good for markets,” but rather that markets have consistently demonstrated resilience. Economies adapt, businesses adjust, and innovation continues—even during prolonged global stress.
What This Means for Investors Today
Periods of geopolitical turmoil often tempt investors to abandon long‑term plans in favor of short‑term reactions. History suggests this approach carries risk.
Instead, consider these principles:
- Stay disciplined. Short‑term volatility rarely alters long‑term financial goals such as retirement, education funding, or legacy planning.
- View volatility as an opportunity. Market pullbacks can create favorable entry points for long‑term investors and tax‑planning opportunities such as loss harvesting.
- Revisit diversification. Volatile environments are a good time to ensure portfolios remain properly balanced across asset classes, sectors, and risk exposures.
- Focus on time horizon. Investors with long horizons have historically been rewarded for patience. Those closer to major financial milestones may benefit from gradual, planned adjustments rather than reactive decisions.
Perspective Matters Most
Armed conflict brings real human cost, and market volatility is never comfortable. But history shows that investors who remain focused on fundamentals, diversification, and long‑term objectives have been able to navigate even the most turbulent periods successfully.
Rather than reacting to headlines, the most effective response is often a thoughtful review of your financial plan—confirming that your strategy still aligns with your goals, risk tolerance, and time horizon.
If you have concerns about how current events may affect your portfolio, this is a valuable time to have a conversation. A disciplined plan, reinforced during periods of uncertainty, has historically been one of the most powerful tools available to long‑term investors.
Source: Hartford Funds, “Military Conflicts May Rattle Markets, But Not for Long”, data as of March 26; S&P 500 Price Index returns compiled by Morningstar and Ned Davis Research. Past performance does not guarantee future results. [Hartford M...s 3.8.2026 | PDF]
