March 9^th, 2026

With the Middle East gripped in an acute crisis, it’s worth examining how prior military conflicts and significant geopolitical events impacted the U.S. stock market—and what history suggests for investors today.

In 20 major post-World War II military interventions and hostilities that we evaluated, the S&P 500 fell six percent, on average, from the initial market impact to the trough level. In 19 of the 20 events, the market took an average of only 28 days to return to where it had been prior to those events.  The duration of a particular conflict historically has not had much bearing on market performance

The good news is, heading into this Middle East crisis, our leading U.S. economic indicators were not hinting of U.S. heightened recession risks. Consumer spending, service sector, and employment trends have been relatively sturdy, although there are fragilities for the latter under the surface. The fourth quarter of 2025 corporate reporting season has shown respectable earnings, revenue, and profit margin trends, and forward consensus earnings estimates have risen further.

Despite an above-average U.S. GDP growth forecast in 2026, RBC Global Asset Management assesses that the Middle East crisis has “introduced a new meaningful macro [economic] risk and, while these kinds of military actions don’t usually have lasting economic significance, we acknowledge that the range of potential outcomes for the economy and markets has widened. Iran and the Middle East are a key source of energy for the world, and should the conflict be sustained or even escalate, restrictions to oil supply and/or higher crude prices could hinder economic activity and/or weigh on investor sentiment.”

We believe it’s prudent for investors to assume that military and geopolitical risks can push the U.S. equity market into a temporary five percent to 10 percent pullback or, in rarer cases, an even longer-lasting correction of greater magnitude.

Brief midyear pullbacks are common, even when the market ends up performing well for the full year. The S&P 500 declined by 10 percent or more at some point during the year in more than half of the years since 1980. And as we’ve noted before, midterm election years often have been accompanied by market turbulence and market drawdowns. These lower moves—typically were followed by a robust rebound that usually went on to set new highs

We are maintaining U.S. equities at current levels in portfolios as long as indicators are signaling that the U.S. economic expansion should persist, and S&P 500 profit growth is not materially threatened.

Sincerely

Lonnie Schick & Dave Sim