How the Stock Market Has Performed During and After Major Wars — And What Long-Term Investors Should Do

War news frequently gets investors down, and their investment portfolios as well. Many investors wonder if they should sell their stocks and invest in cash. This article shows how the stock market responded to five recent international wars, and what happened when investors jumped out of the market and missed the best trading days.

What Actually Happened After Five Recent Wars

Today’s news is filled with the recent war in Iran. Headlines have been mixed so far, but many investors imagine a worst‑case scenario and want to feel in control and “do something.” However, this can be one of the biggest threats to their long‑term wealth.

Historically, after most stock market shocks, equities have often, but not always, fallen quickly when uncertainty explodes, then recovered over the long term. Despite the bad news, in each of the last five major global conflagrations, the U.S. equity market, as represented by the Standard & Poor’s 500 Index (S&P 500), produced positive returns.

THE SPOILS OF WAR MAY GO TO THE LONG-TERM INVESTOR

Patient people who stayed invested have the opportunity to grow wealth over the long term. Here’s how U.S. stocks reacted after five conflicts, using Standard & Poor’s 500 Index data, with dividends reinvested. Data is as of event month-end. Source: shiller.com. Past performance does not guarantee future performance.

Gulf War – August 1990 to February 1991

Iraq’s invasion of Kuwait on August 2, 1990, triggered a sharp market decline, as investors feared an oil shock and recession, but recouped losses, as the S&P 500 grew by approximately 9.4 percent one year from when the war began.

Over the long term, as the conflict resolved and confidence improved, the S&P 500 went on to deliver average annualized total returns for the five- and 10-year periods beginning July 31, 1991, of about 12.4 percent and 17.8 percent annualized.

Long-term investors who maintained their investment strategy saw their portfolios recover and reach new highs. By contrast, those who strayed from stocks and invested their assets in Certificates of Deposit would have earned between 5 percent and 7 percent.

September 11, 2001

The September 11 attacks hit U.S. equity markets, already battered by the dot‑com bust. U.S. exchanges closed for four trading days, then the S&P 500 dropped roughly 12 percent in the first week after trading resumed.

Over the following months, volatility stayed high, but investors who stayed diversified and reinvested dividends saw their portfolios recover as the economy stabilized and stocks moved higher in the subsequent years. In other words, the initial shock and awe turned into a temporary setback rather than a permanent investment loss for many investors.

Afghanistan War – October 2001 to August 2021

When the Afghanistan war began on October 7, 2001, the stock market was volatile and mostly down, battered by dot-coms and the reverberations of 9/11. From late 2001 into 2002, returns remained volatile and sometimes negative. Over the following several years, however, the S&P 500 Index delivered positive annualized gains.

Iraq War – March 2003 to December 2011

Stocks dipped briefly when the U.S. invaded Iraq in March 2003, as uncertainty spiked. However, over the following 12 months, the index grew by nearly 35 percent, and from 2003 through 2006 it produced an annualized return of roughly 17.1 percent. The U.S. declared the end of major combat operations in Iraq in May 2003, but the war did not formally end until December 2011, when the U.S. military completed its withdrawal.

Russia-Ukraine War – February 2022 to ?

Russia’s invasion of Ukraine in February 2022 precipitated a quick sell‑off as investors worried about energy prices, sanctions, and global growth. Within several months, markets later recovered much of that decline, and U.S. stocks have since produced positive, though uneven, returns.

What Happens When You Miss the Best 50 Days

Moving out of the market in response to war news can be more dangerous than staying in, and the market will likely win.

Do your friends and family sell stock based on bad news, and tell you they plan to buy them back later when the market rebounds? Many people say that’s their plan. The problem is that some of the best trading days in market history often occur near the worst days. Sitting in cash shows the cost of market timing by removing the single best trading days.

Staying fully invested instead of selling out would have hypothetically seen a $100,000 investment grow to well over one million dollars. By contrast, missing just the 10 best trading days would have cut the ending value to approximately $571,200. Similarly, missing the best 20 days of trading reduces the value to roughly $376,600

THE WAR ON MARKET TIMING

Most long-term equity gains have come from just a few trading days. Wells Fargo Investment Institute studied what happened to a $100,000 investment in the S&P 500 from July 1, 1995, through June 30, 2025.

Past performance is no guarantee of future results. Data is the unmanaged Standard & Poor’s 500 Index and does not include reinvested dividends.

Don’t Go to War with Your Investment Plan

When a new war breaks out, start with your financial plan, not the headlines, and don’t fight your long-term family financial plan. Look at these five core principles:

• First, confirm that your asset allocation, which may include stocks, bonds, and alternative investments, continues to fit your long-term financial goals. If your allocation still matches your timeline and comfort level, you likely don’t need to do anything.
• Second, do you have rules for how and when to rebalance your portfolio? Investment rules on why and when to get out, if at all, can give you and your family structure when emotions might be telling you to sell, and fast. Rules can remove impulsive decision-making from the equation. For example, instead of reacting emotionally to bad news, you might agree to rebalance your portfolio, once or twice a year, or when an asset class drifts more than, say, five percentage points away from where you want to be.
• Third, check your liquidity. A healthy emergency fund helps your family ride out market volatility without needing to sell certain holdings in your portfolio.
• Fourth, remember your time horizon. War-driven market downturns may feel forever but rarely are. Reminding yourself of your actual investment timeline, which could be 10, 20, or 30 years away, can help maintain perspective.
• Fifth, consult your financial advisor or team. Periods of global stress are precisely when a trusted professional earns their value. A good advisor helps you separate risks from noise, can identify whether you need to change courses, and keep you accountable for your long-term financial plan.

Frequently Asked Questions About Stocks and Wars

How did the stock market do during and after the Cuban Missile Crisis?

During the Cuban Missile Crisis in October 1962, U.S. stocks had already been sliding for months, then fell further as people feared a nuclear Armageddon. The S&P 500 decreased by 22.5 percent from its peak on December 12, 1961, to its low point on June 26, 1962.

The equity market staged a sustained recovery when the standoff was resolved; the S&P 500 grew by about 22 percent one year later, from mid-October 1962 to mid-October 1963, with the full year of 1963 producing a total return of 22.8 percent after the crisis of war.

The moral of the story is that investors who stayed invested through the crisis saw their portfolios rebound and grow rather than lock in panic‑driven losses.

How does the Vietnam War fit into the idea of being patient during conflicts?

Vietnam is a reminder that patience has limits. Over the main U.S. involvement from 1965 to 1973, the market delivered roughly a 40–45 percent cumulative gain, about 5 percent annualized, even with constant war headlines and bylines. The real damage for investors came later from inflation and policy mistakes in the 1970s, not necessarily from the war alone, so your plan must prepare for prolonged economic forces in addition to short‑term conflict shocks.

What if a war leads to a prolonged and severe bear market? Should my financial and investment plans change?

Major international conflicts can trigger recessions, bear markets, or both; your financial plan should assume such events may occur several times during your investing lifetime. Being committed to your long-term investment strategy is a great way to weather the storm of war.

How do I keep from getting overwhelmed by negative headlines and market noise?

You do not need to follow every headline to be a successful investor. In fact, it’s often best to ignore the headlines. Decide in advance which sources you trust and ignore most day‑to‑day commentary. Focus on signals that affect your actual plan, such as changes to your income, expenses, or time horizon. Everything else is background noise that rarely deserves a trade.

What should I do if I already sold during a war‑related panic?

You are not alone, and the most important step is deciding how to re‑enter the equity market in a disciplined way. Consider reinvesting over time rather than in one lump sum. Think about your selling experience as a lesson, or as tuition, where you learn by not repeating what you did before.

Is it safer to move everything into gold or cash during conflicts?

An asset allocation that includes gold may work for some investors, but that depends on their long-term objectives, time frame, and risk profile. Gold and gold stocks held up better than the S&P 500 in the early 2000s, but they still work best as a diversifier, not a core growth engine. Unlike traditional investments, gold does not generate cash flows such as dividends or earnings, and its value is largely driven by investor sentiment and macroeconomic conditions, making it inherently more speculative than income-producing assets.

How should I talk with my family about war headlines and our investments?

It helps to reaffirm your long-term plan with your family. Explain that the equity markets have existed through many wars and have still historically produced long‑term growth over time. Invite questions from your family, and emphasize that you have, or will, discuss your plan with your advisor team.

How often should I review my strategy when the news is scary?

When the market is volatile, checking your portfolio daily or every other day is likely to raise your stress levels and could lead to impulsive selling. A better strategy is to review your financial plan and investment holdings semi‑annually or annually.

However, if you have a major life transition, such as a divorce, job change, retirement, or inheritance, it’s best to review as it happens.

Final Thoughts on How Investors Should React to War Drums

Abandoning your plan during wartime, either short-term or prolonged, is often a costly mistake.

History has shown that even the most severe market downturns, including those sparked by international wars, have ultimately given way to recovery and growth over the long term. Investors who stay the course and resist the urge to abandon their long-term plan are best positioned to capture that recovery when it comes.

At Glassy Mountain Advisors, we help families achieve their dreams, enjoy their lives, create lasting, meaningful legacies, and build generational learning and growth.

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Schedule a complimentary financial planning discussion to ensure that you have a long-term strategic investment plan that is not at war with your portfolio.

The information provided in this report should not be considered financial advice or a recommendation to buy, sell, or hold any particular security. Glassy Mountain Advisors, Inc. l is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Glassy Mountain Advisors including our investment strategies, fees and objectives can be found in our ADV Part 2 and/or Form CRS, which is available upon request.