How war and Fed fund rates may impact your Singapore stock portfolio
Periods of heightened market risk are typically created by shifts in expectations, which investors need to consider and price in
EQUITY market research tells us that wars tend not to have lasting effects on stocks. The same goes for major geopolitical shocks. Initial overshoots correct themselves quickly, and investors should aim to sit tight.
This is generally good advice, provided you have a generally diversified portfolio.
A study by LPL Research of 21 geopolitical events – ranging from Pearl Harbor to 9/11 – found that the S&P 500 index on average fell by 1.2 per cent on the first day of the event. It took an average of 22 days from then for the market to hit rock bottom, with an average loss of 5 per cent. This loss was recovered in 47 days.
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