By Kyle Plotkin
Investment Advisor Representative
[email protected]
The ongoing conflict with Iran has understandably taken center stage in the news, and with it, investor attention. Markets don’t like uncertainty, and geopolitical events like this tend to create short-term volatility as investors react to rapidly changing headlines. We’ve already seen this play out this year (specifically over the past month), with the S&P 500 experiencing a few modest pullbacks during periods of escalation, followed by quick rebounds when tensions appeared to stabilize. It’s a good reminder of just how quickly sentiment can shift in moments like this.
At the same time, stepping back and looking at history can be incredibly helpful. The chart below shows how the stock market has behaved during past wars and conflicts, and the takeaway is pretty clear. While markets may react in the short term, they have historically shown a strong ability to recover and move higher over time.
Even with that context, it’s still easy to feel uneasy when markets pull back. But the reality is, this type of movement isn’t unusual at all. On average, the S&P 500 experiences a 5% pullback about three times per year, a 10% correction roughly once per year, and a 20% bear market decline every 5-7 years. In other words, volatility is not something unique to this period of crisis. It is a normal and expected part of investing.
The second chart helps put that into perspective. It shows the maximum pullback each year alongside annual returns, and what stands out is that even in years with strong positive returns, pullbacks are still common. In fact, the average intra-year decline is around 14%, which means that even “good” years have uncomfortable moments along the way.
Bringing it back to today, the Iran conflict is simply the latest example of something markets have navigated many times before. Headlines may drive short-term swings, and we may continue to see volatility as the situation develops. But history suggests that these events tend to have a limited long-term impact on the overall trajectory of the market.
For long-term investors, the takeaway remains the same. Volatility, whether driven by geopolitics, economic data, or investor sentiment, is part of the process. Staying disciplined through the inevitable 5%, 10%, and even 20% downturns has historically been one of the key drivers of long-term success. While the situation in Iran may continue to dominate the headlines for now, maintaining perspective and focusing on long-term goals rather than short-term noise remains the most important strategy.