Dear Valued Investor,
As the Iran conflict enters its second month, geopolitical stress continues to test investors. Historical stock
market performance during geopolitical conflicts helps remind us that stocks are far more resilient than the
moment may suggest. As we assess today’s environment and the uncertainties surrounding ongoing military
operations in Iran, we focus on two past conflicts we believe are instructive, though past performance does
not guarantee future results.
The two periods offer contrasts. In 1990, at the start of the first Gulf War, the U.S. economy was slipping
into recession. Corporate profits were flattening, inflation remained elevated, and consumer confidence was
fragile. With little fundamental support in place, markets initially struggled. Yet even then, equities began
recovering well before the conflict formally ended, anticipating eventual stabilization.
By contrast, in 2003, when the Iraq War began, the economy had already healed from the dotcom bust and
the 2001–2002 corporate accounting scandals. Corporate earnings were rebounding, monetary policy was
supportive, and valuations were reasonable. With stronger fundamentals in place, markets responded
positively after hostilities started and began a five-year bull market that didn’t peak until October 2007.
Today, we see elements of both periods — but importantly, we do not see evidence that the long‑term
economic or earnings outlook has been meaningfully impaired. First and foremost, a demilitarized Iranian
regime would ultimately contribute to a safer world and more stable markets, mitigating a key geopolitical
risk that has persisted for nearly five decades. From a market perspective, nothing about the current conflict
undermines our confidence in the long‑term attractiveness of equities. For stocks, the more positive 2003
path seems more likely than 1990.
Beyond the human element, we can all acknowledge that this environment is uncomfortable. The damage
the Iranian regime has inflicted on energy and other infrastructure in the region is unsettling. Iran maintains
control of the Strait of Hormuz. There is no easy off ramp. Yet history shows that markets often recover well
before geopolitical tensions fully resolve and frequently with surprising force once clarity begins to emerge.
As stocks hinted at with big gains on the last day of March, that outcome remains possible in our view.
While no one can predict how long this period of volatility will last, the underlying economic foundation and
corporate America’s earnings power remain strong. Attractive opportunities are likely to emerge from this
downdraft once U.S. military objectives are achieved and tankers can move freely through the strait.
We believe it important to keep portfolio risk at or near long-term targets and remain well diversified. For
long-term focused investors, we see opportunities to take advantage of weakness.
Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any indiv idual.
There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing
involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject
to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged
statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any
investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future
results.
All data is provided as of March 31, 2026.
All index data from FactSet.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.
Diversification does not protect against market risk.
Past performance does not guarantee future results.
Asset allocation does not ensure a profit or protect against a loss.
This research material was prepared by LPL Financial, LLC.
Not Insured by FDIC/NCUA or Any Other Government Agency
Not Bank/Credit Union Guaranteed
Not Bank/Credit Union Deposits or Obligations
May Lose Value
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