Will Kosovo Affect the Stock Market?
For Immediate Release
April 16, 1999
Media Contact: Will Casserly
wcasserly@ricedelman.com
(703) 251-0110
S & P 500 Went Down In Only 13 Years Since 1940 According To Edelman Financial Services
Fairfax, VA - Even if the United States sends ground troops into Kosovo, or if America's involvement there drags on, it is unlikely US stocks will be adversely affected by the conflict in the long run, according to a 59-year analysis of world events and their affect on the stock market, released today by Edelman Financial Services Inc.
Since 1940, the S&P 500 Stock Index fell in only 13 years out of 59, the Edelman Financial Services analysis found, with the last full-year drop occurring in 1990, when Iraq invaded Kuwait. However, the Edelman Financial Services report also noted that the S&P is vulnerable to a great amount of volatility in the short term -- during and immediately after a particular crisis.
The Edelman Financial Services analysis noted that in the five weeks following a major crisis, such as the Korean War, Nixon resigning, or the Gulf War, stocks dropped an average of 16%. But in the six months following each crisis, stocks gained an average of 15%, and increased 22% one-year afterward, on average.
"Investors must remember that the stock market is a yo-yo. It drops fast and hard, and rises equally so," said Ric Edelman, chairman of Edelman Financial Services Inc. "Don't try to `time' the market. Maintain a long-term investment strategy and ignore short-term fluctuations, for they have little impact over long periods," he said.
"Consumers should stay the course on their investments, even when the news is filled with doom and gloom", Edelman added. "Our figures show that from 1940 to 1998, the market went up 78% of the time - despite some pretty awful problems, including World Wars, the Kennedy assassination, recessions, hostages in Iran, the Mid-East oil crisis, and the Gulf War."
Ric Edelman's new personal finance book, The Truth About Money, is now available in bookstores (Hardcover, $25.00, from HarperCollins). Edelman Financial Services Inc. manages almost $1 billion in client assets in the United States and six foreign countries.
|
STOCKS DURING AND AFTER A CRISIS |
|
Crisis |
Drop in S&P 500 |
Next Six Months | Next Year |
| Korean War | -15% in 5 weeks | +31% | +36% |
| Sputnik | -10% in 3 weeks | +8% | +30% |
| Steel Price Roll Back | -20% in 8 weeks | +11% | +24% |
| Liquidity Crisis | -12% in 4 weeks | +16% | +42% |
| Arab Oil Embargo | -17% in 9 weeks | -1% | -28% |
| Nixon Resignation | -19% in 5 weeks | +30% | +27% |
| Hunt Silver Crisis | -12% in 4 weeks | +26% | +29% |
| Financial Panic | -26% in 3 weeks | +7% | +16% |
| Gulf War | -12% in 3 weeks | +11% | +25% |
| Average | -16% in 3 weeks | +15% | +22% |
|
WORLD EVENTS DO NOT DESTROY STOCKS |
|
The S&P 500 Went Down in Only 13 Years Since 1940 |
||
| Year |
Event |
S&P 500 |
| 1940 | Germany invades France | -9.78% |
| 1941 | Pearl Harbor | -11.59 |
| 1942 | Gas rationing begins | +20.34 |
| 1943 | War escalates | +25.9 |
| 1944 | Consumer good shortage | +19.75 |
| 1945 | Roosevelt dies | +36.44 |
| 1946 | Labor strife | -8.07 |
| 1947 | Cold war begins | +5.71 |
| 1948 | Berlin blockade | +5.5 |
| 1949 | Russia explodes A-bomb | +18.79 |
| 1950 | Korean conflict begins | +31.71 |
| 1951 | Korean conflict | +24.02 |
| 1952 | Government seizes mills | +18.37 |
| 1953 | Russia explodes H-bomb | -0.99 |
| 1954 | McCarthy hearings | +52.62 |
| 1955 | Eisenhower falls ill | +31.56 |
| 1956 | Suez canal crisis | +6.56 |
| 1957 | Russia launches Sputnik | -10.78 |
| 1958 | Recession | +43.36 |
| 1959 | Castro seizes power | +11.96 |
| 1960 | Russia downs spy plane | +0.47 |
| 1961 | Berlin Wall erected | +26.89 |
| 1962 | Cuban missile crisis | -8.73 |
| 1963 | Kennedy assassinated | +22.8 |
| 1964 | Gulf of Tonkin | +16.48 |
| 1965 | Civil rights unrest | +12.45 |
| 1966 | Vietnam war | -10.06 |
| 1967 | Race riots | +23.98 |
| 1968 | USS Pueblo seized | +11.06 |
| 1969 | Japan is new economic power | -8.5 |
| 1970 | N. Vietnam invades Cambodia | +4.01 |
| 1971 | Wage and price freeze | +14.31 |
| 1972 | Record US trade deficit | +18.98 |
| 1973 | Mideast oil crisis, Long gas lines | -14.66 |
| 1974 | Deep recession in US & Europe | -26.47 |
| 1975 | Recession deepens | +37.2 |
| 1976 | Gold prices plunge | +23.84 |
| 1977 | Trade wars loom | -7.18 |
| 1978 | Interest rates surge | +6.56 |
| 1979 | Inflation & oil prices skyrocket | +18.44 |
| 1980 | American hostages in Iran | +32.42 |
| 1981 | High unemployment | -4.91 |
| 1982 | Worst recession in 40 years | +21.41 |
| 1983 | Interest rates fluctuate | +22.51 |
| 1984 | Deficit goes over $200 billion | +6.27 |
| 1985 | Record number of S&Ls fail | +32.16 |
| 1986 | Tax Reform Act of 1986 | +18.47 |
| 1987 | Stock market tumbles | +5.23 |
| 1988 | Fear of recession | +16.81 |
| 1989 | Invasion of Panama | +31.49 |
| 1990 | Iraq invades Kuwait | -3.17 |
| 1991 | The Gulf War | +30.55 |
| 1992 | Civil War in the Balkans | +7.67 |
| 1993 | The Great Flood of 1993 | +9.99 |
| 1994 | Worst bond market ever | +1.31 |
| 1995 | Oklahoma bombing | +37.43 |
| 1996 | Olympic park bombing | +23.07 |
| 1997 | Inspection Crisis in Iraq | +33.36 |
| 1998 | President Impeached | +28.6 |
| 1999 | Kosovo Crisis (through 3/99) | +4.98 |
Source: Edelman Financial Services Inc.
Rescue Your Money, written by award-winning financial advisor Ric Edelman, is your personal investment recovery plan.
