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30 Days Later

Last month I wrote an article detailing how markets have behaved during prior occurrences of geopolitical events since the year 2000. In that twenty-three-year period, I highlighted eight major events which included an Israeli-Palestinian conflict, the Afghan invasion, the invasion of Iraq, the Syrian and Libyan civil wars, and even the Crimean crisis in Ukraine. After researching the market movements around those events, the data collected suggested that while these events are tragic for those involved, they rarely have lasting impacts over the short or long run for investors. Now that we have passed the 30-day mark for the most recent Israeli-Hamas conflict, I wanted to take the opportunity to see how the market performed in the immediate aftermath. 

Hamas fighters attacked Israel on October 7th, 2023. October 7th fell on a Saturday, so the closest trading day would be the close of the market on October 6th, 2023. That night, the S&P 500 Total Return Index had a value of 9,294.82. 30-days later, on November 6th, 2023, the index had a value of 9,425.34, representing an increase of about 1.40% over that time period. Compared to the eight other instances we looked at, that return is right in the middle with four occasions being better and four being worse for a 30-day return. 

While it is interesting to see that this instance had a positive return and landed right in the middle of the other geopolitical events, I thought it was important to see if this return differed from “normal”. When I say “normal”, I mean that since the year 2000, there have been about 6000 30-day periods (5979 actually) from 1/3/2000 to 10/20/2023. The mean return over those instances was 0.67%. The median return was 1.30%. The standard deviation of these almost 6000 returns was 4.79%*. In summary, the return the market experienced for the thirty days following the attack on Israel by Hamas was well within normal ranges. 

Geopolitical events can make for great news headlines, but rarely should be used to make investment decisions. Anything can change and the final chapters have not been completed on the current conflict in the middle east, but the data suggests there is not anything market related to fear. Your financial plan should accommodate these events, but your portfolio likely does not need changing due to this event unless you’re directly affected by it. 

As always, please don’t hesitate to reach out to us with any questions you might have.  *The population of data has a skewness of -0.98 suggesting it is negatively skewed. This means that there are more data points to the right of the mean than to the left, leaving a longer left tail. This also means that the data is not normally distributed, reducing the importance of the standard deviation.