While the escalating military conflict between the U.S. and Iran has sparked short-term market anxiety, historical S&P 500 data reveals a massive 685% average return 20 years after a war begins, explaining why wealth management firm Creative Planning calls such conflicts a long-term “boost for asset owners.”
Long-Term Growth Over Short-Term Volatility
Recent clashes near the Strait of Hormuz, including U.S. strikes on Larak Island rocket launchers and retaliatory drone attacks by the Islamic Revolutionary Guard Corps on bases in Jordan, led to immediate market pullbacks. Dow futures fell 0.16%, and Brent crude surpassed $91 per barrel, up 6.05%. However, historical data suggests early volatility shouldn’t deter investors.
According to an analysis of U.S. military conflicts compiled by Charlie Bilello, Chief Market Strategist at Creative Planning, the S&P 500 index consistently climbs higher over the long run.
Looking back to World War II, the stock market averaged a 3% return after three months of a conflict, expanding to 12% at the one-year mark, 94% over five years, and a staggering 685% after 20 years.
“The best we can say in studying past military conflicts: with the passage of time, the stock market has tended to rise – and the more time that has passed, the more it has risen,” Bilello wrote. He attributes this growth to the fact that “all wars eventually come to an end” and that the broader “economy & earnings” tend to grow in the long run despite immediate geopolitical impairments.
Inflation, Deficits, and Asset Prices
During a recent podcast discussing America’s surging national debt, Creative Planning’s Peter Mallouk noted that debt-funded government spending acts as a powerful market catalyst.
“Debt spending is actually inflationary, which helps asset owners,” Mallouk stated. “The more money there is out there, chasing the same amount of things, the prices go up.” He described this dynamic as a “huge boost for asset owners, for stocks,” even in times of record spending.
Geopolitical Reality Meets Market Fundamentals
Despite disruptions to global energy corridors, corporate earnings often dictate long-term index performance. As Bilello notes, while citizens bear the brunt of inflation, corporations operate to maximize profit.
With earnings expected to surge, stocks frequently hit record highs amidst broader geopolitical uncertainty, reinforcing why short-term crisis fears are often just market noise.
How Has the Market Performed in 2026?
The S&P 500 index has advanced 12.44% YTD. Similarly, the Nasdaq Composite index was up 13.63%, and the Dow Jones gained 10.70% YTD.
On Friday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed lower. The SPY was down 0.23% to $769.35, while the QQQ declined by 065% to $716.43. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.03% lower at $535.06.
In premarket on Monday, SPY was down 0.17%, QQQ declined 0.13% and DIA tumbled by 0.16%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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