The Usual Suspects
The first time we watch a great movie which has a surprise twist, our reaction tends to be anything but “yeah, I already knew that’s how it would play out”.
Think…….
- When we find out which character is Luke Skywalker’s father in The Empire Strikes Back
- Bruce Willis’ character in The Sixth Sense
- The end of The Usual Suspects, when super villain Keyser Söze’s identity is revealed
But once we have seen the twist, it’s never the same. We know how the plot unfolded, so we can easily and confidently lean on our historical knowledge to avoid any surprises. “I know how this one ends.”
The same tends to be true in the markets. We can easily look at the chart below and think “yep…..I already know the stock market overcame both Gulf Wars, 9/11, Crimea, etc.”
But the next tragic geopolitical event……..the one which is not yet a chapter in history……..always feels completely uncertain and uncomfortable. Right now, of course, that is the sad situation in Ukraine.
History can be a powerful guide to the future. Especially since the majority of people go out into the world every day and try improve their lives. These collective efforts tend to result in major challenges being overcome.
Equity markets have historically powered through geopolitical events
Sources: Capital Group, Refinitiv Datastream, Standard & Poor’s. Chart shown on a logarithmic scale. Index levels reflect price returns, and do not include the impact of dividends. As of January 31, 2022.
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