Wellington examines how wars historically influence financial markets, challenging the assumption that geopolitical conflict consistently drives major asset price swings. The paper argues markets often remain resilient, with only 9% of large US equity moves tied to military events, while long-term damage tends to emerge only in extreme outcomes like state collapse.
War and Markets: What’s The Connection?
Wellington Management
Owen Lamont
Article
6 Pages
Key Takeaways
Limited Immediate Impact: Only 9% of major US stock moves from 1900–2020 were linked to military events, with daily declines often modest at 3%–5% following major shocks.
Severe Tail Outcomes: Market destruction becomes meaningful when countries collapse, with historical examples showing equity losses exceeding 90% in defeated economies after major wars.
No Clear Buying Signal: Historical evidence suggests war periods do not consistently present attractive entry points, with markets sometimes remaining flat or volatile despite heightened geopolitical risk.
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