Stocks have gotten off to a slow start in 2022, with the potential for Federal Reserve rate hikes coming and the geopolitical worries over Russia and Ukraine only adding to the uncertainty. I don’t want to minimize the impact of a major geopolitical event, but it’s good to have perspective on how it can impact your investments.
The current situation adds to the many geopolitical crises this century. Here’s a chart from LPL Research laying out the past geopolitical events, along with the number of days it took for the stock market to bottom and then the number of days till recovery.
Every one of these events would have represented a great reason to sell in the moment. All those sales would have been regretful not long after. While each of these events are impactful, it is important to know past major geopolitical events were usually short-term market issues.
The good news is corporate America continues to see strong earnings. S&P 500 earnings per share in the fourth quarter are tracking to a 31% year-over-year increase (FactSet). The top-line growth was extremely strong as well, with revenue growth up close to 15%.
Bottom Line
In the short term, it’s likely that external factors (Ukraine, Inflation, Fed, Midterms, etc.) will create volatility but over the long-term earnings growth is what should continue to drive stock prices. Currently, the U.S. economy is strong, earnings are healthy, and corporate America is in great shape.
As always, please do not hesitate to reach out with any questions.
George Maroudas
847-550-6100
george@pmgwealth.com
Twitter @ChicagoAdvisor
Disclaimers and Sources:
Chart from LPL Research
S&P 500 Data from FactSet Report
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