Written by: Jimmy Topping | Advisor Asset Management

The recent U.S. and Israel air campaign against Iran has jolted global markets, sending energy prices sharply higher while disrupting shipping routes with the Strait of Hormuz effectively closed. It’s the kind of geopolitical shock that tends to trigger immediate market anxiety, what many call a “panic premium.”

While the headlines are unsettling, history gives us some useful perspective: markets often stumble during major crises, only to regain their footing once the initial uncertainty begins to clear.

The "Crisis Effect" vs. Long-Term Reality

History is a crowded library of geopolitical shocks. Data from Ned Davis Research (NDR) tracking 59 major crisis events since 1907 shows a consistent pattern: markets tend to retreat during the heat of the event, averaging a decline of roughly 7.0%, only to recover those losses within a few months once the immediate uncertainty passes. This helps frame the fact that volatility tends to be a reaction to uncertainty, not a change in long-term economic reality.

Past performance is not indicative of future results.

Time in the Market Beats Timing the Market

When volatility surges, it’s easy to lose sight of the broader horizon. Since 1936, the S&P 500 has rewarded patient investors with a per-year average total return of 12.6%, posting gains in nearly 77% of those calendar years. The index’s true strength, however, lies in its resilience. Historically, it has turned every major setback into a comeback: on all four occasions it suffered a 20% drawdown, it rebounded with gains of over 20% the following year.

The evidence is clear: for investors with a long-term plan, success comes from staying invested, not attempting the impossible task of precisely timing market moves. Geopolitical selloffs are often recovered within months, and as long as the economy’s underlying fundamentals remain sound, the most effective strategy is to look past the noise, remain disciplined, and stay focused on long‑term objectives.

Source: AAM, FactSet data | Past performance is not indicative of future results.

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