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When global tensions rise, it’s natural for investors to wonder whether the markets will follow. Global conflicts can dominate the news cycle, accompanied by commentary and speculation that reinforces the sense that global events lead to market volatility.
While global conflict is significant, it’s not the sole factor determining how markets will react. Markets respond to a combination of factors: How global events influence earnings, the current economic climate and investor expectations.
Recent history demonstrates how resilient the markets can be. Despite prolonged conflicts in the Middle East and in Eastern Europe, including the war between Russia and Ukraine, markets have continued to advance because stock prices are primarily driven by corporate earnings and economic growth.
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As companies expand and continue to generate revenue, markets are more likely to respond to that strength, even during global uncertainty.
While global events aren’t the sole proprietors of market volatility, they can influence certain areas of the market more directly. For example, energy prices often respond very quickly to regional instability that can negatively impact supply chains.
Meanwhile, defense contractors benefit from increased production demand during periods of international conflict. Precious metals such as gold and silver tend to attract investors seeking stability in times of uncertainty.
Where I see a more lasting impact, however, isn’t in the headlines. It’s how investors respond to them. Breaking news events can be emotional, leading investors to make decisions simply based on how they feel.
However, factors such as risk tolerance, investment alignment, long-term strategy and future goals should be guiding these decisions instead.
To put this into practice, investors need to remember that market volatility is not indicative of structural weakness. In most cases, it’s a reflection of capital shifting between sectors as valuations, leadership, company goals and missions change.
The key is understanding the reason behind those investments. Investors with their financial professionals who can identify what they own and why they own it are much less likely to make impulsive decisions when markets change.
To prevent impulsive decisions, some investors may need to simplify exposure through broader market vehicles such as ETFs or mutual funds, which might provide more stability.
Global events will always garner attention, but markets are built to process information. While headlines might influence short-term sentiment, factors such as risk alignment, diversified positioning and an investor’s ability to adhere to a long-term strategy determine how portfolios perform through periods of geopolitical tension and uncertainty.
Steven Conners is an investment advisory representative of, provides advisory services, and conducts securities transactions through CoreCap Advisors, LLC. Conners Wealth Management is a separate entity and not affiliated with CoreCap Investments or CoreCap Advisors.
