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Geopolitical Unrest: Short-Lived Market Reactions
Geopolitical events often trigger immediate emotional responses in the markets, typically leading to an initial drop of 5-8% within the first 36 hours. However, history shows that these downturns are usually short-lived, with stocks often recovering back to previous levels within two weeks. Long-term investors should not mix political sentiments with investment decisions, as the market tends to adapt and rebound over time despite significant conflicts, such as World War II, which saw stock prices rise amidst turmoil. Instead, focus on flexibility in strategy—adjusting to outcomes rather than making decisions based on immediate emotional reactions to geopolitical situations. Awareness of potential short-term dislocations is important, but prudent investors should remain committed to their strategies and continue moving forward.