That’s the first rule investors should follow when considering how to invest when chaos strikes, and the Iran war is no different, market pros told Business Insider.
The conflict-fueled sell-off picked up again on Thursday as the war sent oil prices back to $100 a barrel. The S&P 500 is now down nearly 3% for the year. As of February, the index was on track for one of its worst year-to-date performances in decades.
- The US-Iran war has jolted markets, with stocks falling and oil and bond yields rising.
- There are a few ways to steer through the volatility, market pros told Business Insider.
- Tips include avoiding the rush into “war stocks” and increasing cash allocation.
Investors have been quick to sell the broader index and purchase volatility-linked ETFs, according to a report from VandaTrack Research, which tracks retail investor flows. But the most important thing for investors to do is not panic and make dramatic changes to their portfolios, strategists who spoke with Business Insider said.
Since World War II, markets have recovered their losses in the six months following the start of a war 72% of the time, according to Art Hogan, the chief market strategist at B. Riley Wealth Management.
Some investors may feel the instinct to rush into areas of the market that could see a boost from the war, such as energy, aerospace, and defense. The problem with that strategy is that by the time most investors have caught on, the gains in those sectors have largely been priced in, meaning many traders risk losing money, Hogan said.
He pointed to how many investors piled into defense stocks at the start of the year when the US raided Venezuela, with the iShares US Aerospace & Defense ETF rising as much as 9% in the first two weeks of the year. The ETF, though, is now down 3% from its mid-January peak.