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How has the stock market performed during times of crises?How is this war a little different?

Before we start to explore the impact of wars on the stock market, it's imperative for us to address the fact that wars are disastrous times and should be strongly condemned. Lives are lost and families are broken apart during times of wars. While we are reading about this in the comfort of our homes, there are people out there in the field fighting for their lives, their families and the sovereignty of their nation. In the grand scheme of things, any investment loss we might be suffering is insignificant. It's a stark reminder to us to never take the more important things like our family and sovereignty of a nation for granted.

Alright, time to focus back on the main topic before I start to churn out a full article on it.

If you are wondering about the performance of the stock market in times of war, here's a simple diagram from FxMacro on how S&P 500 performed in a few examples like Vietnam War, Gulf War etc

For these examples, the resemblance is uncanny in most of them in the sense that the market recovers and scales much higher when viewed in a 2 year period. While the invasions have caused a dip in the market, it usually does not last more than a couple of months and the market almost always recovers swiftly. There is an exception with the Afghanistan War too but we all know what happened to the market in the next few years. The market recovered from 2023 onwards and was on a bull run till the financial crisis in 2008.

If you are looking for more data, you can check out this article from Financial Review.


The report covers about 30 global crises in total. You will be surprised to know that the market ends up having a positive % change in 1 year for 27 global crises. That's a huge percentage and this is also the reason why it's important to stay invested during such times as the recovery then follows are usually swift and you probably do not want to miss out those periods.

Having said all of these, the current Russia-Ukraine situation can be a bit worrying as it happens during a period where we are seeing very high inflations. The last time a global crisis happened during periods of high inflation is probably the 1970s. The 1970s is a period where stagflation occurs and the stocks market see a negative 11.6 real return over the period from 1969 to 1982. The Arab oil embargo contributes greatly to the rise of inflation during that period. If you go deep into the report (shown in Financial Review) I was showing above, you will see that the crisis which resulted in the worst market return in a 1 year period is the Arab oil embargo.

If further drastic economic actions (such as more sanctions on Russia) are to be taken, we can expect to see the inflation issue further worsening. To give a context, Russia provides 13% of the global oil supply and 17% of the global gas supply. More sanctions on Russia are likely going to send energy prices rising. That's inevitably going to cause a sharp rise in inflation. If that is to happen, stagflation is likely going to creep in and that's not going to work well for anyone holding equities. I think no investor wants to go through a decade of investing to see a negative 11.6% return again. This is of course the worst case scenario.

Personally, I still believe to be invested and follow a regular plan of DCA-ing during this period.

On a side note, another interesting thing that I will be taking note of during this crisis is how Bitcoin performs. This is probably the first time a war of such significance to the global economic market happens in Bitcoin's relevant years. Some have lamented the fact that Bitcoin is just like a technology stock due to its increasing correlation in the past few months. I personally think that the first response of investors during times of crisis is to shift their funds into tools which have less risk and hence we are seeing the correlation between Bitcoin and technology stocks here due to their risk nature. The next few months will be important to watch to see if such correlation continues to happen or if Bitcoin could begin to step up to be a true "Digital Gold".

In terms of use cases, I think this crisis has further demonstrated how cryptocurrencies will continue to remain very relevant in today's world. Donations in cryptocurrencies are pouring in for the Ukrainian military. There's also conversations on the possibility of Russia using cryptocurrency to avoid the effects of Western sanctions. Hence, Bitcoin is definitely not a "useless piece of code" or "Tulip-mania".

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