How the Stock Market Responds to War
Wars are associated with increased volatility, but often rising prices as well
The war in Ukraine is causing a devastating human toll, in terms of lost lives including heavy civilian casualties, and the displacement of millions. Much has been written about courage and leadership, the humanitarian crisis, and geopolitical implications. A less-talked-about angle and in a broader context is: How does war impact on the stock market? It isn’t an easy question to answer because each situation is unique, but by examining major wars in the past 108 years, it can help to inform us as to what we might expect as the current conflict continues. Samuel Clements (aka Mark Twain) was purported to say “History doesn’t repeat, but it often rhymes” and so it is informative to examine what happened to stock prices around the two World Wars, the Korean War, and the Vietnam War.
A Brief History Lesson
Often times there are precipitating events to which we can trace the start of a major war. Since our focus is on the U.S. market, in some cases I’ll narrow the start date for our analysis to when the U.S. became involved.
Our start date for the First World War is July 28, 1914. Also known as The Great War, it began after Archduke Franz Ferdinand of Austria was…
