Geopolitical standoffs between countries across the globe aren’t an infrequent event anymore! But going by the data might provide you with some relief as a stock market participant!
In addition to the US Fed’s monetary tightening stance, a tense environment in economies around the globe began to emerge as border tensions between Russia and Ukraine began to spice up.
Also, oil prices began to inch up as oil supply from Russia, being an important member of the Organization of Petroleum Exporting Countries (OPEC), would have been disrupted owing to political instability in the region. Higher crude oil prices mean a higher import bill for India, which imports more than 80% of its oil demand currently.
What Does the Data Say?
A look at the past data provides some relief. In many instances, markets have quickly rebounded after the risk-off! Data for the past two decades shows that stock markets across the globe mostly have ignored geopolitical risks after a point (excluding only two instances) by not only rebounding from their lows but also giving positive returns to investors within a month of such an event!
For instance, the Indian benchmark index declined 1.2% on June 15, 2020, over the India-China border tensions but rebounded and gained 7.6% the following month. A similar incident happened last week when the Indian benchmark indices tanked 3%, only to bounce back!
Should This Concern You?
As long as nothing changes fundamentally in a company, there’s no reason to worry! Instead, these temporary dips should be seen as opportunities to accumulate stocks of sound companies. If one thinks rationally and goes by the data, it becomes a lot easier to control emotions. After all, this wasn’t the first or last geopolitical event that took the stock market participants for a roller-coaster ride!
The stock markets might experience further volatility owing to developments in this event, but investors should stand by their investing discipline. After all, the markets have taken only one direction in the long run, and that’s climbing upwards!