Dear Clients,
The second week of February has historically been a bit slippery for the market, and this year is no exception. We saw a similar pattern last year as well. Seasonality doesn’t determine long-term outcomes, but it can help explain some of the short-term choppiness we’ve experienced recently.
It’s difficult to separate markets from current geopolitical events. As a Veteran, I have a very personal sensitivity to any conflict that involves U.S. servicemen and women. That will always come first for me. Setting that aside and looking strictly at markets, history does offer useful perspective.
Much of the recent weakness appears tied to the buildup to this moment. Markets tend to price in uncertainty ahead of events — not after. By the time military action formally begins, investors have often already adjusted expectations and reduced risk. Looking at prior instances when the United States entered hostilities — including Desert Storm, Afghanistan, Iraq, Libya, and others — the S&P 500 has, on average, been up roughly 3–4% one month after the onset of hostilities and approximately 4–5% six months later. In several cases the gains were significantly stronger, such as the period following the 2003 Iraq invasion and the start of Desert Storm. While every situation is different and past performance never guarantees future results, the pattern has often been one of stabilization — and sometimes recovery — once uncertainty shifts to clarity.
There is an old saying on Wall Street: “Sell the rumor, buy the news.” In environments like this, that dynamic can apply. Markets often weaken as uncertainty builds. Once events move from speculation to reality, some of that uncertainty is removed, and relief rallies are not uncommon.
Given that context, I believe there is a very real possibility we could see some stabilization — and potentially relief — following this military action. That doesn’t eliminate volatility, and broader factors like earnings, interest rates, and economic data still matter. But history suggests that reacting emotionally to geopolitical headlines has rarely served long-term investors well.
As always, we remain disciplined and focused on long-term outcomes rather than short-term noise.
Please don’t hesitate to reach out if you’d like to discuss further.
Sincerely,
Kessler Investment Group, LLC
Past performance does not predict future results.
All information in this presentation is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic performance data is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. Certain statements contained within are forward looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Please consult your adviser for further information.
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