How to Invest When Geopolitics Shake Markets

Periods of geopolitical tension almost always bring a surge of market anxiety.

News coverage intensifies, forecasts begin circulating, and investors start wondering whether they should step aside until things become clearer. The instinct is understandable—conflicts, wars, and global tensions feel inherently unpredictable. But markets have an unusual relationship with geopolitical events. They often react immediately, yet their longer-term outcomes rarely match the dire expectations investors initially fear. Financial writer, Ben Carlson, in his recent article highlighted this dynamic by examining how markets behaved during past geopolitical crises. His research provides a useful reminder: predicting market outcomes during these events is incredibly difficult and attempts to trade around them rarely work as intended.

Why Investors Try to Time These Events

When geopolitical shocks occur, the instinct to act feels logical.

Investors may assume that stepping out of the market temporarily can help avoid losses. The plan usually looks something like this:

1. Sell when uncertainty rises
2. Wait for the situation to stabilize
3. Re-enter markets once the risk feels lower

The problem is that markets rarely wait for certainty. By the time events become clearer, prices have often already adjusted.

History shows that many of the strongest market rebounds occur while uncertainty is still high, which makes timing these moves exceptionally difficult.

What Past Events Tell Us

Looking back at major geopolitical crises provides perspective. Markets certainly experience volatility during these periods, but the longer-term results often surprise investors.

A few examples highlighted by Ben Carlson illustrate the point:

World War I (1914–1918)
• U.S. markets initially declined sharply and closed for several months.
• Once trading resumed, stocks rallied strongly.
• By the end of the war, the Dow had gained roughly 40% from its starting point.

World War II (1939–1945)
• Markets reacted negatively at the outbreak of war and again after Pearl Harbor.
• Those declines proved temporary.
• By the war’s end, stocks had risen roughly 50% overall.

Korean War (1950–1953)
• Despite the geopolitical tension, the Dow gained about 60% during the conflict.

Vietnam War escalation (mid-1960s)
• Markets advanced during the early years of U.S. involvement.
• By the time American forces withdrew, stocks had risen more than 40%.

Cuban Missile Crisis (1962)
• One of the most dangerous geopolitical moments of the Cold War.
• The market experienced only a modest decline and finished the year higher.

September 11, 2001
• Markets fell sharply when trading resumed after the attacks.
• The losses were recovered within months.

Iraq War (2003)
• Stocks rallied shortly after the invasion began and continued rising throughout the year.

None of these examples suggest markets ignore geopolitical risks. In many cases, there were sharp short-term declines. But over time, markets proved far more resilient than investors initially expected.

The Core Lesson: Markets Don’t Wait for Clarity

The key takeaway isn’t that markets always rise during global conflicts. The more important lesson is that markets move ahead of certainty. By the time investors feel comfortable that the worst is over, prices have often already recovered. This is why attempts to avoid volatility by exiting the market frequently backfire. Missing just a handful of recovery days can dramatically reduce long-term investment returns.

What This Means for Long-Term Investors

Geopolitical risks are real, and markets will continue to react to them. But history suggests that building an investment strategy around predicting these events is unlikely to succeed.

A more reliable approach is to focus on principles that have consistently worked through periods of uncertainty:
• Maintain broad diversification
• Accept that short-term volatility is unavoidable
• Avoid making portfolio decisions based on headlines
• Stay aligned with long-term investment goals

We cannot control geopolitical events, and we cannot reliably predict how markets will respond to them.

What investors can control is their discipline.

And historically, that discipline—staying invested through uncertainty—has been one of the most important drivers of long-term investment success.

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^{This information has been prepared by Brandt Butt who is an Investment Advisor and Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor and Portfolio Manager can open accounts only in the provinces in which they are registered.
iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and a business name under which iA Private Wealth Inc. operates.}

^{Historical observations referenced from research compiled by Ben Carlson at A Wealth of Common Sense. https://awealthofcommonsense.com/2026/03/geopolitics-vs-markets/}