The United States stock market shuddered last week on a report that President Trump had tried to stop an F.B.I. investigation of his former national security adviser, with the Dow Jones industrials falling 373 points in one day and drawing comparisons to the Watergate-era bear market. ... By the middle of this week, the Standard & Poors 500-stock index had recovered virtually everything it lost after the Trump-Russia news broke, and on Thursday it closed at a new high.
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By and large, investors should tune out political events, said James B. Stack, president of InvesTech Research and Stack Financial Management, who has done a study of what he calls crisis events and their effect on markets. Historically speaking, and as a seasoned investor, Id say investors should just ignore geopolitical events like Brexit or whatever is happening in Brazil.
The problem, Mr. Stacks research has found, is that geopolitical events may be widely feared, and there will often be a knee-jerk market reaction when theyre unexpected, but seldom do they have a lasting impact. Underlying economic trends and monetary policy are far more important.
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Of 11 major geopolitical events examined by Mr. Stacks firm, only two the Nazi invasion of France in May 1940, and Japans bombing of Pearl Harbor in December 1941 led to market losses over one-week, three-month and one-year periods (and in the case of Pearl Harbor, the one-year decline was less than 1 percent).
President John F. Kennedys assassination had no discernible impact: Stocks were up more than 20 percent a year later.
As geopolitical crises go, those were pretty big shocks to markets and investor psychology. So far, nothing in the Trump administration has come close. Still, expectations that Mr. Trump and a Republican Congress would succeed in enacting business- and shareholder-friendly tax and regulatory changes are part of what has driven recent market gains.
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If anything, history suggests that long-term investors should buy stocks after markets fall on bad geopolitical news, not sell. But thats not to say this time wont prove to be an exception, or that markets wont correct for other reasons.
Whatever happens with President Trump, the United States is in the ninth year of the second-longest bull market since World War II; none have made it past 10 years. Valuations are getting stretched. Sooner or later, there will be another correction, and eventually a bear market.
https://www.nytimes.com/2017/05/25/business/stock-market-politics-volatility.html
Time the market, if old.