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If you have ever scanned the morning headlines and then flinched at your portfolio, you’re far from alone. Market drama sparked by U.S.-Israel strikes on Iran, or tariff shocks in April, might…
Archive edition · Market data and company circumstances reflect 9 August 2025, when this newsletter was sent.
If you have ever scanned the morning headlines and then flinched at your portfolio, you’re far from alone. Market drama sparked by U.S.-Israel strikes on Iran, or tariff shocks in April, might seem like doom signals yet markets absorbed them, paused, and rebounded. Growth forecasts remain broadly intact, and equity indices continue finding new highs.
So what gives? Why do some events trigger cascading sell-offs while others vanish from the market’s radar within days? It turns out, there are patterns and they can help explain (and maybe soothe) investors’ nerves.
Goldman Sachs studied market movements surrounding major geopolitical shocks since 2008 — like Arab Spring, the invasion of Ukraine, the COVID-19 pandemic, and current trade conflict flare-ups. They tracked how key asset prices (equities, currencies, bonds, commodities) moved over the five days leading up to each event and the ten days following.
Their findings weren’t what most investors might expect. Rather than sudden military escalations causing market havoc, it’s the events that disrupt the mechanics of the global economy, particularly those that slow growth or stoke inflation, that leave lasting scars.
The pandemic set the gold standard. Markets fell rapidly in March 2020, then crawled towards recovery. Economic shutdowns, disrupted supply chains, and sweeping policy responses meant the damage was not just acute; it was lingering.
Close behind were the global tariffs rolled out during the Trump era and recent U.S.–China trade tensions in 2025. These are different but related phenomena: They reshape the flow of goods, upend tariffs and sourcing patterns, strain supply lines, and force tough calls from central banks and fiscal policymakers.
The single biggest daily drop since 1987 occurred the day the WHO declared COVID–19 a pandemic. It wasn’t the virus itself, it was the unknown. Would this last two weeks or two years? Would working habits change forever? Suddenly, uncertainty weighed more heavily than the known risks.
Remember the shock of the 2016 Brexit vote? The sudden change in a country's trajectory rattled perceptions and valuations, particularly in currency markets. Surprise electoral outcomes or referenda like these tend to spark volatility.
A curious finding: Not every big geopolitical event rattles markets. The U.S. withdrawal from Afghanistan in 2021, for instance, had minimal immediate impact. Why? Because the global economy hardly shifted. Afghanistan plays a small role in global trade, bond markets, or commodities flows.
But that doesn't mean there were zero broader effects. Analysts now see that move as laying groundwork for later geopolitical shifts, such as Russia's full-scale invasion of Ukraine, by sowing doubts about Western resolve.
Similarly, U.S. inaction in Syria in 2013 did not rattle markets at the time but may have emboldened other actors and indirectly influenced migration and politics in Europe.
Markets often underestimate how prolonged a conflict or crisis can be. Early 2025 optimism about a near-end to the Russia-Ukraine war, with some forecasting a 65% chance of resolution, was premature. The war continued. Markets listened, but the worst signals come when expectations miss reality.
Furthermore, not all asset classes react equally. Corporate credit markets (where companies issue bonds and loans) tend to hold firm unless default risk dramatically rises. Short-term military flare-ups, like Chinese drills near Taiwan or Houthi attacks in Saudi Arabia, often don't move credit spreads. Investors seeking quality credit remain resilient.
But when systemic risk begins raising doubts about a country or sector’s health, such as Greece’s debt crisis; yields climb, borrowing costs rise, and new vulnerabilities emerge.
Markets learn — but slowly. The first tariff shock in April triggered a pronounced reaction. By later announcements, though, the shock factor had diminished. Repetition breeds familiarity and less reaction.
“Time is more important than timing,” as the saying goes. Investors absorbed the idea that these risks can be priced in, even if they care deeply about them.
World events can grab headlines, but not every story moves the markets in a meaningful way. The real test for investors is knowing what truly matters, what to ignore, and how to position for resilience. Here are five clear lessons:
This article preserves the analysis in our weekly newsletter sent 9 August 2025. Market prices, forecasts and company circumstances reflect the time of publication and may have changed.
This material is general information, not personal financial advice or a recommendation to trade. Investing and trading involve risk, including loss of capital.