It goes without saying that war is a humanitarian tragedy. We are not ignoring this, but many may worry about the impact of war on their planning and their portfolio.

We will not aim to give any geopolitical or strategic commentary. That is not, and never will be, an area we specialise in. Instead, we will look at history and the research that has been done on the effects conflict can have.

What does history say?

Wars and financial markets go back hundreds of years. Financial markets have sometimes been a factor in why wars have been fought. The financial markets of countries that have lost major wars are often devastated, but global markets have been quite robust. Despite this resilience, wars do tend to reduce returns from global markets and increase volatility. Wars have been a factor in some of the most extreme positive and negative historical stock and bond market returns. On average, markets do decline during times of war or crisis, which makes sense. We know share prices theoretically reflect future earnings adjusted by how risky they are. If times of war or crisis reduce expected future earnings or increase risk, drops in share prices are likely. On the other hand, once the effect of wars subsides prices go back up as expected earnings increase and risk decreases.

Researchers looked at 440 international political crises over the period of 1918 to 2002. One thing to note from this study was that on average, an international political crisis took place almost every two months. These obviously would not all have been as extreme as what we are seeing now but it does show they are common. They found world markets had a largely negative reaction in the first month of a crisis, below-average returns for the remainder of the crisis, and a partial recovery at the end. In the case of countries involved in the crisis, on average, any stock market losses are only partially recovered when the crisis ends.[1] Research has also found that bond markets can fare worse than equities during wars.[2]

So, is it all bad news?

Wars can be devastating, particularly for the countries on the losing end. However, while they can be responsible for some extreme market reactions, they have not been responsible for the most extreme ones. Global markets fell by 31% in real terms during World War 1 and 15% during World War 2. However, they fell by 54% during the Wall Street crash of 1929, 47% during the 1973 oil shock and recession, 44% during the 2000 dot com bubble burst, and 41% during the global financial crisis. In addition, peacetime market crashes occur with greater regularity than major wars. Only worrying about the effect of war on your portfolio ignores the reality of what usually drives market falls.

While stock returns have been volatile throughout history, they have been reliably positive. Investors who have spread their money across global markets have had a much more stable ride than those who invest in individual markets. Historic returns, after inflation, have been much higher than any returns we use in our financial forecasts for clients. These returns are despite two large scale global wars, the cold war, multiple civil wars around the world, revolutions, economic depressions, and multiple pandemics.

In terms of direct portfolio exposure, it is worth noting that Russia represents around 0.35% of global equity markets, and that is before this is diluted down by any bond holdings in your portfolio. To put this in perspective, Apple’s cash reserves alone are of a broadly similar magnitude to Russia’s entire stock market capitalisation. 

What if I need my portfolio to maintain its value now?

An obvious answer to this question is that if you want to ensure you do not lose money over the short term you should keep it cash. However, you will be trading short term satisfaction for long term pain as inflation erodes the spending power of that capital.

It is important to remember that holding shares and bonds spread around the world and across multiple sources of return has proven to be the best way to invest for the long term. This does not eliminate the risks involved with investing, but it can reduce them. Nobody really knows what will happen in the war or then next. We, therefore, rely on the evidence on how best to invest. Specifically, research has shown that trying to position portfolios to profit from wars has historically not gone well.[3]

[1] Berkman, H. and Jacobsen, B. (2006). War, Peace and Stock Markets. [online] Available at:

[2] Schwert, G.W. (1989). Why Does Stock Market Volatility Change Over Time? The Journal of Finance, 44(5), p.1115.

[3] Ferguson, N. (2008). Earning from History? Financial Markets and the Approach of World Wars. [online] Brookings. Available at: