Investors may be surprised that the "temperature" on both sides in the Iran War has continued to ratchet up. Yet this surely could have been expected given the dramatic military objectives that they US and Israel achieved in the opening days.
Death of their Supreme Leader. Destruction of their nuclear facilities and dozens of military ones. Deaths of countless civilians.
How could they not respond in whatever way they could?
What is apparent is that Iran's military can reach far into the territory of its neighbors. They may not be able to easily attack US territory, but our "interests" are scattered throughout the region. The illusion of safety in places like Dubai has been shattered. The dependency of most of the World on energy from the region means that everyone has a stake in this war.
Iran's actions put pressure on the US to find a diplomatic solution before energy infrastructure is destroyed, creating ripple effects through the global economy. Especially pressured are the countries of Europe and Asia that import vast amounts of oil and gas from the Middle East.
At this stage, it doesn't appear that diplomacy has a seat at a table. (Or, that there is even a table.) For investors, this means more speculation about "what's next" and therefore more volatility.
We are nowhere near "out of the woods" yet. And with each day comes more investors capitulating to their fears.
This is when we need to remind ourselves of the history of stock markets during upheavals such as these. It's always bad. We just don't know for how long. We also don't know how much is already factored into share prices and how much they will pop when good news hits.
COVID-19 was a good example.
The S&P500 declined by 34% from its peak in just one month. A month later, stocks responded to news of massive government stimulus, retracing half of the losses in just two weeks.
This is not a prediction of how matters will transpire this time, of course. Instead, it is a warning to investors that missing those few weeks would have been devastating to their portfolio growth.
We don't know what the trajectory will be. But we DO know that company results are far less volatile than company share prices.
Resisting the urge to take what appear to be rational steps (but that later are known to be merely an emotional salve) might be the best decision an investor can make at times like this.
How can we remain focused on the long term, you might ask?
We can "cheat" by asking ourselves a simple question that will inevitably reframe our thinking:
"Is Warren Buffett selling?"
If we don't think he would be, then we already know the best path to take.