Weekly Reading Recommendations
Stocks Can Go Down: Volatility is the Toll Paid for Returns (Carson Group)
Preventing Identity Theft & Scams (Fidelity)
Why Car Insurance Rates are so High (VOX)
Geopolitical Unrest: Assessing Market Implications
The escalating tensions in the Middle East have sparked fresh bouts of volatility in the stock market. While geopolitical events can influence short-term market behavior, as investors tend to sell risk assets (stocks) first and ask questions late, over time the markets care more about the health of the economy (currently strong) and corporate earnings (also strong) over such disruptions, as illustrated in the Chart of the Week.
This is not the first time geopolitical turmoil has been the catalyst of turbulence for investors. In the end, staying invested in a diversified, goal-oriented portfolio has consistently benefited investors through countless geopolitical crises, wars, pandemics, and recessions. We emphasize the importance of broad-based diversification across asset classes as the most effective hedge against unforeseen risks, while remaining adaptable in portfolio positioning to navigate potential impacts on the global economy and financial markets.
This week's highlight article from J.P. Morgan takes a deep dive into the potential market implications should the conflict escalate into one with a larger geo-economic footprint.
The bottom line: The world is a scary place—it always has been and always will be. Do not let that come between you and your portfolio.
Click Here to Read "Geopolitical Unrest: Assessing Market Implications"
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Life Strategist: What Holly's Reading
Inflation has caused grocery prices to soar, making shopping stressful (on your mind and wallet). Everyone is looking for a way to save on everyday grocery items. Meet the 6 to 1 shopping method that might save you money and time at the grocery store.
The 6 to 1 Grocery Shopping Method (realsimple.com)
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Charts that matter
S&P 500 Returns After Major Geopolitical Events
This week's chart provides a detailed breakdown of how the S&P 500 has reacted following major geopolitical events. Largely speaking, geopolitical shocks over the past several decades have tended to lead to short-sharp sell-offs (around 6% on average), lasting around 3 weeks, before the index then begins its recovery back to prior levels. The median 12-month return following the drawdown is 13.5%, highlighting the benefits of staying invested.
It's important to remember that geopolitical events have tended to see a lot more negative press/discussion/worries, relative to the eventual price action experienced across equity markets.
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