Old photo of a young person next to a storey-tall pile of bombs, overlaid with graphs suggesting changing market data.

War—What is it Good For?

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We might already know the answer to that question because of Edwin Starr's 1970 #1 hit version of the song War: "Absolutely nothing, listen to me." And we’ll say it again. Others might agree with former U.S. Secretary of Defense Robert McNamara who believed that sometimes for the greater good you may have to do bad things. Either way, armed conflict can be a stimulus for a certain kind of progress—trauma and brutality aside.

As of the writing of this post, the 2022 Winter Olympics have run their course, and the pending Russian invasion is in swing, agitating the world's major powers, and everyone else, for that matter.

The start of the games in Beijing were straight out of your favorite Dalí painting. You know, the big ones that form one story from 100 feet away but are full of dark surprises in detail.

This one goes like: Putin is seated with Xi Jinping as he kicks off the festivities. Below the din lies the faint whisper of the International Olympic Committee's ideals: "excellence, friendship, and respect ... with a view to building a better world." The paradox is amplified by commentary from the booths as it trains on the two leaders. 'If Putin invades Ukraine this week, will Jingping support him?' 'What will the United States do?' Regardless, the Olympic games play out their predictably weird peaceful irony as the pressure of uncertainty builds.

More practically speaking, the U.S. economy hinges upon its global involvement. To illustrate, the country has spent north of $6 trillion on various wars and foreign conflict since the turn of the century.

But what even is six trillion? Consider counting, lets's say a number per second. It'll take you eleven days to reach one million. A billion? About thirty years. A trillion? Over 31,000 years. Look, even to Oprah the concept of six trillion is nothing more than an abstraction. Together we raise a collective drawl and resound, "good laawd, that’s a lot of money!"

Back to earth: if history stands up to task, there may not be a long-lasting impact on the U.S. economy. As we know, the stock market is what we can characterize as macho-menopausal. Consider, the highest annual return the Dow Jones has ever recorded came in 1915—after it was shut down for four months—during the first World War. Over the course of that war's entirety, the Dow enjoyed a steady 8.7% annual growth. During WWII it was 7%; Korea was over 15%; and Vietnam almost 5%. However, it should be noted that the market's initial reaction to the fighting was more darkly temperamental (citing the aforementioned shutdown). But the bounce-back was notable.

It can be helpful to know that, reasons aside, the U.S. has been generally resilient to conflict and setback. The most damaging times, however, are those when there is uncertainty. It can turn us into a band of anxious Romans wondering about Mount Vesuvius' next move. Uncertainty compelled by external forces has, historically, set in motion a decline in stock market success and prices. Still, the market's mood swings notwithstanding, there are certain trends by which we can offer a guess about what's to come.

For now, we're left to wonder and/or worry about Ukraine. With Russia on the move, it seems like a grand recipe for uncertainty. In recent weeks, you may have personally felt this effect as pressure mounted between the two nations and the market took a hit. So far, there has yet to be taken into account any pending escalation. If and when it is, we have an indication, historically, as to how things could play out over time.

Uncertainty is nothing new. The market is unpredictable, as are the oft-crazy people who influence it. With no control over such forces, it's only left for us to keep our heads in check. The data can be reassuring. But it's at times like this we can hearken back to 1970, Edwin Starr, and the question he posed so forcefully. Regardless of any reassurance, we hope not to look back with poignancy at the obvious answer. Say it again, and again.

The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Beacon Financial Advisory or Lincoln Investment. The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. Past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index.