What We’re Doing (or Not Doing) as the Market Drops
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What are the current impacts of the conflict in Iran on the stock market?
The market is falling again. So what should investors be thinking this week? Motley Fool Money starts now. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoey. I'm joined today by Emily Flippen and Lou Whiteman. Guys, we've got to talk about the topic of the week. We have this war, conflict, whatever you want to call it, in Iran that started last weekend, started impacting the markets on Monday. We're down significantly early on Friday as we're recording. Lou, I want to just get your general thoughts on what do you think as an investor in times like this? What's signal? What's noise? Because it seems like the market goes from panic to the market shoot up every 15, 20 minutes, and it's hard to make sense of things.
The first thing, I want to give everybody a free pass to do nothing. It's always fun to be able to brag six months later, I caught the low and I bought something. If you want to be opportunistic, that's fine. But I think it's good enough for your long-term wealth creation to just not panic sell. The world is changing. Things could be fundamentally different after this than they were before. Good companies tend to survive these things. Yes, I think there's every reason in the world to watch this, to monitor, to think about it. I haven't seen much of a reason to say, oh, no, everything I thought two weeks ago isn't right. Even with today's selloff, we're down 1.5% for the year in the market. It's hard to take a long-term perspective in this moment.
Do not take the second-by-second perspective, at least. You can do a long way towards preserving what you've worked for. Emily, do you have similar long-term views on what to do on weeks like this? Yeah. And actually, I have some numbers to back it up too. And in fact, there is, to lose point, a lot of data that supports the idea that patience wins out whenever there is geopolitical volatility like this. And panicking does not and will not help us. And history tells us that stocks actually do go up after these types of events, weirdly enough. And We can debate about why that is. But there's some good data here from the Morgan Stanley Wealth Management Global Investment Office that the average return of the S&P 500 a week after a geopolitical shock is actually positive.
One month out, it's around 1.5%. And then when you zoom out to a year, it's over 8%. And if you look at that, the median return after a year, it's even better at over 10%. So it goes to show that panicking generally after an event like this has already happened by either selling your stock, selling the market broadly, really isn't the best way to go about handling, managing risk or volatility in your portfolio. But I say that not to be blasé about the risk of what we're seeing. And certainly what we're seeing happening in Iran, and particularly with the Strait of Hormuz, that is very, very concerning and can be concerning for very specific industries and certain businesses. So I think the bigger question, there's two separate ones, I should say.
There's a question of, oh my gosh, I'm the average American investor. I have a lot of money in index funds. I have a lot of money diversified across the market, across many different industries and businesses. And I'm panicking because of this geopolitical event. What do I do? And of course, the answer is sit on your hands, be patient, do nothing. And then there's this question of, oh no, I'm seeing the fact that 20% of global oil consumption is flowing through the straits. There's a potential for further conflict in the Middle East. And now I think some of my particular stocks or individual companies may be exposed. And that's when you have to go back in and start evaluating those particular businesses and exposure in those specific instances.
And there are some cases that I think are worth reevaluating in this scenario. Lou, going to those specific points, One of the things that we talked about early in the week a little bit, and maybe we're seeing this as the week rolls on, is there specific risks related to the economy?
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