Q1 Market Commentary – April 2022

The financial markets have faced challenges over the first quarter. While the pandemic and its impact on the economy continued to wane as the year began, increasing inflationary pressures, and the prospects of increasing interest rates, weighed on investors’ minds. In the background were growing tensions in Eastern Europe, as Russian troops amassed on Ukraine’s borders.

Whenever markets drop, investors understandably worry, but we have seen the impact of wars on stock markets before and know that, from a historical perspective, their impact is short-lived. Let’s consider the impact that several conflicts have had on the world’s largest equity market, the US.

In the six months after war broke out in Europe in 1914, the Dow Jones fell more than 30%. The impact of the war and a reduction of liquidity in the markets resulted in the stock market being closed in July 1914. The markets reopened in January 1915, and over that year the Dow Jones rose 88%. Over the entire period of the war, the Dow Jones gained 43%, or about 8.7% annually.

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