It can be difficult to not feel sadness and despair at the human toll of this devastating conflict. However, in this week’s blog, I break down how events like these have impacted investors and financial markets in the past.

No one knows Putin’s full intentions and its early days into this conflict. Whilst de-escalation could happen quite quickly, there is also the risk this could be a drawn-out process with Putin potentially striving to absorb Ukraine into Russia.

Geopolitical events are not uncommon and occur rather frequently. There is a long history of geopolitical events such as wars and terrorist attacks. Generally, the market has a sharp fall, followed by a rebound.

In researching this blog, I looked at various data since World War 2 and interpreted the following key statistics.

• The average market decline following geopolitical events has been around 5%
• The average number of days it takes for the market to bottom out is 22 days
• From the bottom, in the following 12 months, the market recovers 15% on average

Source: LPL Financial

The above shows that generally markets don’t react too negatively to geopolitical events and tend to recover quickly. However, I am talking about averages and different geopolitical events can have more or less severe impacts on investment markets. For example, following the Pearl Harbor attack in 1941, the US sharemarket declined by almost 20%.

After Russia crossed the border into Ukraine late last week, markets had a kneejerk reaction as expected. The S&P/ASX 200 index fell around 3%. Of course, I do not have a crystal ball, and no one knows how deep this conflict could go and how far-reaching the economic consequences could be.

The US, UK, and other western countries have imposed several economic sanctions on Russia in a bid to slow them down.

Some economists are discussing fears of Stagflation. Stagflation occurs with inflation rising whilst economic growth is slow. The world experienced this in the 1970s when higher oil prices pushed up inflation. Given Russia controls a large part of Europe’s oil and gas supply, there are fears the current conflict could trigger stagflation as oil prices are on the rise.

In conclusion, whilst global conflicts such as we are experiencing now are terribly sad with the loss of human life, generally investment markets are resilient to such conflicts.