Recent unrest in the Middle East has caused another sharp, though not unusual, market downturn. While these events can be unsettling, maintaining perspective is essential. 

Since 2020, there have been four significant market pullbacks. In three cases—the pandemic, last year’s tariff issues, and the current Iran-related tensions—remaining invested was the best approach, as each proved to be a buying opportunity rather than a reason to panic. 2022 was the exception, and we reduced risk exposure as market conditions worsened from the fall of 2021 through the following spring, when over half of all stocks had already declined 20% from their highs. 

Current market behavior aligns with historical patterns. Sharp declines are often followed by swift recoveries. For example, after a recent near-10% drop due to global oil supply concerns, the market regained those losses in just over two weeks. Historically, once markets recover previous levels after a pullback, they often continue to rise in the months that follow. However, seasonal patterns, especially in midterm election years, suggest the coming months may be more volatile than in non-election years. 

Markets do not require a full resolution of geopolitical events to recover. They need only enough clarity to indicate the worst-case scenario is unlikely. Once this is established, investors typically move forward quickly. The probability is that the low for this year was established at the end of March. 

The market entered this period on solid footing. At recent highs earlier this year, broad participation across stocks suggested a longer-term downturn was unlikely. 

Volatility is inherent to investing. Periods like this are the price of long-term returns. Sometimes, the greater risk is reacting emotionally to short-term events rather than remaining disciplined. 

While this latest concern has affected markets, it will not be the last. There will always be new headlines and uncertainties.