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Chapter 1: 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.
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Chapter 2: How should investors navigate market volatility during geopolitical events?
Emily brought it up. The Strait of Hormuz, there's a lot of oil flowing through that area. Oil is a big expense for a lot of people in the U.S. and around the world. If we're already at this weak economic position, particularly in this K-shaped economy that you keep talking about, could this be the straw that breaks the camel's back? Yeah, it really could be. And I do.
Again, you talk about, like Emily said, you don't want to be too dismissive or ignore. We already had headwinds. We already had some percentage of the U.S. consumers out there who are struggling. Adding $1 to a price of a gallon of gasoline could be the tipping point that sends just so many consumers that we do see
just a real pullback in spending that then spirals into a pullback in commercial spending and becomes a recession. Even here, it's good to recall that this is part of the cycle, even if it comes from an unexpected event, we are probably due for one of these. Again, I think as a long-term investor, we try and, you know, wait it out, look for opportunities.
So even there, I don't want to panic, but I do think that it's at least a reasonable worry to say, I mean, I don't think that the conflict is going on, that's going on, can't be resolved in some way that we can, you know, God, like this changes everything. But I do think we have to, you know, look at where the economy may go from here, and at least prepare ourselves for it.
We've been talking about it forever. Maybe this is what does it. The good thing about the United States in particular is that we're relatively energy independent. There is some insulation that happens here.
The good thing about the conflict in the Middle East that we're seeing is that there is going to be pressure from both OPEC and the UAE and other countries that depend upon this strait for other shipments to probably resolve this problem sooner rather than later. And it's not to say that we haven't seen massive infrastructure issues that's going to take, you know, months, if not years to fix.
That is a very real headwind. But I do think that the world we're living in today is different than the world we used to live in, where a lot of the geopolitical events like these, when we saw conflict, it was, for lack of a better word, something that was months and months and planning.
And in this administration, we see an administration that is more willing than ever to try new things and then also walk them back quickly if and when they don't work out. So things are more volatile, more quickly shifting now than they ever have been. And I think that's part of the reason why we're heading into the weekend here.
There's a lot of volatility in the stock market just today because people are trying to price in how much can change just in the next 48 hours before the markets open up again on Monday. So there is a lot going on here that I think people are trying to price in. But the good news is, is that I actually think there's a lot of pressure to get this conflict resolved relatively quickly.
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