Recent geopolitical conflict has resulted in loss of life - a reminder that these events extend beyond markets and carry real human consequences. They can also create challenging periods for investors as headlines shift quickly and the broader backdrop becomes more unsettled.
During times like these, anxiety can rise, particularly when price movements appear disconnected from underlying fundamentals. While the near-term outlook is often unclear, this type of environment is not new. History shows that investors have repeatedly navigated periods of disruption, even when conditions felt especially unstable at the time.
Geopolitical Conflict: How Markets Have Historically Recovered
Our partners at LPL Research recently shared a study examining how markets have responded to major geopolitical events over multiple decades, including periods of war, energy shocks, and broader global conflict. Their research shows that while volatility often emerges, particularly in energy and oil sensitive areas as investors assess potential supply disruptions, these drawdowns have historically been relatively modest and short lived.
The study showed markets recovering, on average, about a month after the initial conflict, while longer lasting drawdowns have coincided with broader economic recessions. Importantly, LPL Research notes that as the initial shock fades, investors tend to refocus on underlying economic fundamentals.
Our investment approach reflects this research driven perspective. Portfolios are built with the expectation that unexpected economic and market disruptions will occur over time, allowing us to remain disciplined and measured rather than reactive as events unfold.
Artificial Intelligence: Change That Can Create Opportunity
Advancements in artificial intelligence continue to reshape industries and business models. While AI is often discussed primarily in terms of disruption, technological innovation has historically supported productivity gains and long-term economic growth. As adoption expands, some companies may face near term challenges as they adjust, while others, particularly larger organizations with established infrastructure, data, and systems, may be better positioned to integrate AI effectively.
Over time, companies that thoughtfully deploy AI to improve efficiency, decision making, and scalability will be better equipped to adapt and remain competitive. For investors, this reinforces the importance of maintaining balanced exposure, participating in innovation while remaining diversified across sectors, styles, and economic drivers.
Private Credit: A Risk to Monitor
Private credit has expanded meaningfully in recent years, increasing its role within the broader financial system. As with any rapidly growing area, periods of stress or repricing could influence liquidity conditions, lending activity, and overall risk sentiment, particularly if economic conditions weaken. Historically, these challenges have tended to be more contained than systemic, but they remain an important part of the overall picture for us to monitor.
Staying Focused on the Long Term
Markets are currently digesting multiple risks, yet the importance of perspective remains unchanged. By positioning portfolios with diversification and risk buffers in advance, we are better equipped to navigate a changing landscape without making emotionally driven decisions. Our focus remains on managing risk, preserving capital through uncertainty, and staying aligned with your long-term objectives. As always, we will continue to monitor developments and communicate as conditions evolve.
Please don’t hesitate to reach out with any questions, and we wish you a smooth transition from winter into spring.
Best,
Grant
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.