North Korea is rattling their sabre by threatening to send four ICBM missiles toward Guam.  President Trump has threatened severe retaliation towards North Korea and their dictator Kim Jong Un by unleashing fire and fury.

The urge to sell your stocks may be strong but is this best course of action?  Let’s look at previous wars and conflicts to see how our stock market fared during these dark days.

World War II.  The second world war lasted from 1939 to 1945.  During this six-year war the Standard & Poor’s 500 averaged a 10.1% annual return.   During this double digit run the stock market experienced a 9.8% loss in 1940 and a 11.6% loss in 1941.[1]

Korea.  The Korean war lasted from 1950 to 1953 and the stock market averaged a 17.6% annual return.   The stock market was down 1% in 1953.[2]

Vietnam.  The Vietnam War lasted twenty years from 1955 to 1975 and during this terrible war, the stock market generated an average annual return of 8.2%.  During this war, the stock market experienced several double digit drops in 1957, 1966, 1973 and 1974.  The worst drop occurred in 1974 when stocks fell 26.5%.[3]

Cuban Missile Crisis.  The Cuban Missile Crisis occurred in October of 1962 and the stock market fell 8.7%.  However, it rose 26.9% in 1961 followed by a gain of 22.8% in 1963.[4]

Persian Gulf War.   This war lasted from 1990 to 1991 and the stock market rose 12.4%.[5]

Afghanistan.   The war in Afghanistan started in 2001 and, unfortunately, is still going.  The stock market has averaged an annual return of 6.2% during this conflict.  The stock market fell in 2000, 2001, 2002 and 2008 falling 9.1%, 11.9%, 22.1% and 37% respectively.[6]

Iraq War.  The Iraq war lasted from 2003 to 2011 and the stock market averaged an annual return of 6.2%.  The market had one losing year in 2008 when it fell 37%.[7]

I’m praying, of course, for war with North Korea to be avoided so there is no loss of life.  A diplomatic resolution is in the best interest of North Korea, The United States of America and the rest of the world.  Using the previous wars as a guide, holding on to your investments may be the best option for your portfolio if a war should breakout.

You may say I’m a dreamer, But I’m not the only one, I hope someday you’ll join us, And the world will be as one.  ~ John Lennon

I urge, then, first of all, that petitions, prayers, intercession and thanksgiving be made for all people— for kings and all those in authority, that we may live peaceful and quiet lives in all godliness and holiness. ~ 1 Timothy 2:1-2.

Bill Parrott is the President and CEO of Parrott Wealth Management.  For more information on financial planning and investment management, please visit www.parrottwealth.com.

August 11, 2017

 

 

[1] Dimensional Fund Advisors Matrix Book 2017

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Ibid.