Andrew Hallam
06.12.23

Are You Worried About Wars, Market Drops and a Messed Up World?
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The latest atrocities in Israel and Palestine are making us all feel gutted. Coupled by the Russian war in Ukraine, it’s enough to make us wonder what’s happening to the world.

You might even worry about your investments.

Barack Obama once said, “Progress isn’t linear.” Humanity’s progress follows a trajectory like the stock market itself. Humankind improves. Then it appears to pull back. Then it improves again. Then it pulls back.

Our hearts break every time we hear of a natural disaster or an armed conflict.

But we shouldn’t lose hope because there is a positive, long-term trend.

Human Progress Looks A Lot Like The Markets US Stock Market 1972-2023

_{Source: portfoliovisualizer.com}

You might wonder if, “back in the day,” our ancestors embraced the environment, walked around smoking peace pipes and hugging everyone. But Yuval Harari says no. He specializes in World History at the Hebrew University of Jerusalem. In Sapiens: A Brief History of Humankind, he says Homo sapiens have always been battlers and destroyers. When they entered new lands, such as North America, Central America, South America and Australia, they vanquished the largest mammals to extinction.

You might be familiar with Neanderthals. No, we didn’t evolve from them. They were a different, slightly more peaceful type of human. Homo sapiens likely destroyed them. And now Neanderthals are extinct.

But despite the savage parts that might be buried in our DNA, the world is getting better. Harvard College professor, Steven Pinker outlines this progress in his book, Enlightenment Now: The Case for Reason, Science, Humanism and Progress.

Yes, we are still starting wars. But we shouldn’t lose hope that we can create a better world. According to Our World In Data¹, charts outlining the casualties of war look like a long-term stock market chart in reverse.  

Infant mortality rates are also lower. Fewer people die from malnutrition. Violent crimes are down, compared to 20 years ago. We still have a ways to go, with respect to racial and gender equality. But Steven Pinker’s research says these domains have never been better.

Plenty of endangered species are coming back. Global poverty rates are at an all-time low.  Literacy rates are at an all-time high. Sanitation and life expectancy are better than they’ve ever been.

Hans Rosling was a Swedish physician and statistician who spent much of his life educating people about human progress. He said most people are clueless about this progress. You might blame the media and Recency Bias.

Rosling created a short, simple multiple-choice quiz to test people’s knowledge. Here’s the quiz.

Ask your friends to take it. Almost everyone you know will fail.

Humanity’s progress should give you hope: hope to know that your help can make a difference; hope to know that your compassion is important.

There’s also hope in knowing that the markets are resilient. And armed conflicts don’t cause stocks to drop.  

That might sound crazy if you listen to the news. Every day, “experts” on market-based television or radio try telling us why stocks moved up or down. They might say battles at home or abroad will cause stocks to drop.

They do this because stories are better than data…from the standpoint of the viewer. Stories sell.  Stories excite.  Data almost never does.

But the data, itself, is more comforting than the story.

From a statistician’s point of view, war has no more effect on the markets than a newly released single by Carrie Underwood.

Want proof?

Below, I’ve listed several large conflicts since 1914. They include World War I; the Spanish Civil War; World War II; the Arab revolt in Palestine; the Korean War; the Vietnam War; the Suez Crisis; the Falklands War; the US invasion of Panama; the Gulf War; the Bosnian War; the War in Afghanistan; the Iraq War; the Syrian Conflict; the Yemen Conflict and Russia’s invasion of Ukraine.

Sixty percent of the time, stocks were higher one year after these wars began. 

Seventy-eight percent of the time, stocks were higher three years after these wars began.

Ninety-three percent of the time, stocks were higher five years after these wars began.  In fact, the only time stocks weren’t higher was five years after the 1936 Spanish Civil War. 

Some storytellers might say wars are good for stocks.  But that’s bunk, too. As far as the markets go, these performances aren’t much different to any random starting point.

US Stock Market Performances From The Point of War

Source of market returns: DQYDJ²

Progress isn’t linear. It never has been.  We still wage wars.

But we have reasons to be hopeful. We’ve proven to progress.

We should be kind. We should be compassionate. We should help others when we can.

And as always, when investing, we should shun speculation and optimistically stay the course.

Sources

^{1. https://ourworldindata.org/war-and-peace}

^{2. https://dqydj.com/sp-500-return-calculator/}

Andrew Hallam is a Digital Nomad. He’s the bestselling author Balance: How to Invest and Spend for Happiness, Health and Wealth. He also wrote Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas

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