Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back, David.
David Nelson:
Thanks, Brandy. Appreciate it.
Brandy Auterson-Hurst:
Markets have been reacting to the recent conflict in Iran. How do geopolitical issues like this usually impact the stock market?
David Nelson:
Wall Street hates uncertainty and the initial reactions are typically quite violent and usually centered around how long do we anticipate that this new crisis is going to last, but history does give us a little bit of a helpful perspective. I brought along a chart today. It’s a lot of moving parts on here, but stay with, folks. What it’s looking at is the Dow and it’s going back to 1907. We have 59 different crises events that we’ve identified. They’re including wars, financial panics, other global disruptions. Each of the light blue lines represents the Dow, how it’s performing as far as during those events. What’s interesting, I think, is that the initial first reaction has been pretty consistent in this regard, and that is you’re typically looking at about a 7% drawdown, so a 7% drop. But what’s interesting is if you look after a year, historically, and again, this is an average, all these are averages, the yellow line on there is an average, and it basically is showing about a 15% return 12 months after the initial crisis.
Brandy Auterson-Hurst:
Okay. What should investors take away from this when new crises appear in the headlines?
David Nelson:
They’re going to continue to happen. I don’t want to downplay this, but reacting quickly to it in a negative way, in other words, panicking, is probably not the best answer. I would be patient, let’s see how this thing unwinds over the next several weeks and months.
Brandy Auterson-Hurst:
All right, David. As always, thanks for your insight today.
Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.