What a Russian Invasion of Ukraine Would Mean for Investors

January 26, 2022Updated: January 26, 2022

The SPDR S&P 500 ETF Trust traded lower by 1.3 percent on Tuesday and is down 5.2 percent overall in the past five trading sessions. One of the catalysts driving the market sell-off is a potential Russian invasion of Ukraine. On Tuesday, LPL Financial Chief Market Strategist Ryan Detrick discussed the impact a Russian invasion could have in stock prices.

Market Resiliency

In a blog post, Detrick said the overwhelming majority of geopolitical events dating back to World War II didn’t have much of a lasting impact on U.S. stock prices.

“As devastating as a major conflict could be between Russia and Ukraine, the truth is stocks likely will be able to withstand the geopolitical struggle,” he said. “In fact, looking back at other major geopolitical events throughout history reveals stocks usually take them as a nonevent.”

When an Iranian general was killed in an airstrike in 2020, the S&P 500 dropped just 0.7 percent before fully recovering its losses just five days later. In 2021 when the United States pulled out of Afghanistan, the S&P 500 dropped 0.1 percent and recovered within three days.

Recent Geopolitical Events

Even when these types of events have triggered a knee-jerk market crash, Detrick said the markets are typically quick to recover. The S&P 500 dropped 4 percent following the Saudi Aramco drone strike in 2019 but fully recovered those losses 41 days later. The S&P 500 plummeted 11.6 percent in the days following the September 11, 2001 terrorist attacks, but it completely recouped those gains in 31 days.

Benzinga’s Take

While military action always creates uncertainty, the U.S. economy is strong and analysts have a bullish outlook for earnings growth in 2022. Instead of the Ukraine conflict, the potential for aggressive Federal Reserve interest rate hikes may be more of a threat to the bull market in 2022.

By Wayne Duggan

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