Military conflicts mostly haven’t hindered long-term stock growth

History is filled with wars, invasions, and other types of military conflict. In these times of heightened risk, investors may be tempted to reexamine their portfolio. But long-term perspective is key to a sound investment plan. The stock market has grown for well over a century in the face of historic events big and small. Upheaval, despite how it might feel in the moment, hasn't changed that upward trajectory.

Stock market returns following geopolitical conflicts

If there’s a factor that impacts market performance, there’s an index to measure it. Geopolitical risk is no exception. The chart below illustrates 11 points in history where we experienced a peak in the Geopolitical Risk Index, and it shows the return of the S&P 500 Index 12 months after that peak. In most cases, the stock market rose significantly in the year following peak geopolitical risk.

Stocks have typically grown significantly in the 12 months following peak geopolitical risk

S&P 500 Index returns 12 months after a peak in the Geopolitical Risk Index

What long-term investors should focus on

While military conflicts understandably generate concerns about potential market impact, I believe long-term investors should focus on three questions:

1. What’s the economy’s outlook?

Ultimately, I believe investors should stay focused on the businesses that will harness innovations such as artificial intelligence and robotics, develop treatments for debilitating diseases, evolve the nation’s energy sources, and invent new technologies and industries that aren’t even on the radar. History suggests that innovations — and investment opportunities — will continue regardless of geopolitical difficulties.

2. What will the Federal Reserve do with monetary policy?

For all the focus on geopolitics, monetary policy probably matters more. The old adage holds true: Don’t fight the Fed. Historically, the economy has been hurt or helped by monetary policy conditions. It’s important that the Fed recently cut interest rates by 75 basis points in 2025 and seems poised to cut again this year.

3. Does this military conflict change the answer to either of these questions?

Typically, the answer is no, so long as the conflict remains contained or regional. And that can run counter to what some investors might expect. Consider a couple of examples. The MSCI Poland Index has been one of the world’s best-performing indexes since Russia invaded Ukraine, climbing 135.5% (24.9% per year) from the February 24, 2022 invasion through December 31, 2025.¹ The MSCI Israel Index is up 102.2% (36.9% per year) since the October 7, 2023 Hamas attack.² These aren’t outcomes many investors might have expected in the earlier days of those conflicts.

Stick to long-term investing plans

While unnerving, geopolitical conflicts shouldn’t change investors’ long-term investment plans, in my view. History has shown that other factors — economic growth, business innovation, and monetary policy — drive the path of the markets.