Buy on the cannons, sell on the trumpets? Financial advisors talk war and investing

"Buy on the cannons and sell on the trumpets" is the old Wall Street saying when it comes to international wars.

Based on the current Middle East conflict, maybe it should be updated to "sell on tweets." Or, as some financial advisors suggest, just don’t sell at all.

Roughly translated, the maxim suggests loading up on stocks during the panic selling that often accompanies the outbreak of war, and then taking profits when the hostilities - and uncertainty - are over. 

Despite the catchy aphorism, war - historically speaking - has a limited effect on investment performance, according to Victoria Greene, investment officer at G Squared Private Wealth, a partner firm of Sanctuary Wealth. She points out that, while there may be an initial knee-jerk reaction to shots being fired, markets typically recover almost fully within two months.

“Where we are economically drives the markets more than war. Obviously, there is potential for short-term knee-jerk reactions down the road, especially if there were to be a large terror attack in the USA, but a constrained Middle East conflict historically has not hurt US markets dramatically, and any pain was a buy-the-dip moment,” Greene said. 

And while oil spiked briefly last week at the start of the Israel-Iran conflict, rising beyond $77 per barrel, it has since sold off to around $65, lessening the inflationary pressure on the US economy. In Greene’s opinion, an oil shock negatively impacting U.S. stocks, as was the case in the 1970s, was never really in the cards anyway. 

“The US is far more energy independent than the 1970s and are now a net exporter of oil and gas and not importer. During the 1970s we were highly exposed to foreign oil, less so now with shale drilling and the expansion of the Permian basin and US oil and gas production,” Greene said. 

Similarly, Samuel Diarbakerly, founder of Generation Capital Advisors, believes that an oil shock today doesn’t carry the same systemic risk it did in the 1970s due to the fact that the US is now one of the world’s largest energy producers, and the American economy is much more diversified and flexible.

As for its impact on client portfolios, Diarbakerly said a spike in oil prices can impact inflation and consumer sentiment in the short term, but it’s unlikely to derail long-term portfolio performance, especially for diversified investors.

“We remind clients that over the long arc of history, markets have weathered countless geopolitical conflicts and still moved higher. Our investment philosophy is rooted in the belief that the market is resilient and ultimately reflects the strength and innovation of great public companies, not short-term headlines,” Diarbakerly said.

Added Diarbakerly: “We don’t minimize the seriousness of global events, but we also don’t believe in reacting emotionally. History shows that staying invested has consistently been the more productive path for long-term wealth creation.”

In terms of asset allocation, Diarbakerly leans into a “core and explore” model, staying anchored in low-cost, broad-market exposure while being thoughtful about targeted opportunities, such as energy, infrastructure, or alternatives, that can complement a core allocation.

“The key is building a portfolio that’s resilient, not reactive. Safety doesn’t have to mean sitting in cash, it means being positioned with purpose and staying invested through uncertainty,” Diarbakerly said.

Stability after fireworks

While initial reactions to military hostilities often involve a spike in volatility, markets tend to stabilize unless the economic or political fallout becomes systemic, according to Bryan Shipley, chief investment officer for Coldstream Wealth Management.

During the 2022 Russia-Ukraine Invasion, for example, oil prices peaked seven days after the invasion but later retreated as supply concerns eased. And in the 1990 Gulf War, crude oil rallied from August to October 1990 but fell below pre-invasion levels by the start of Operation Desert Storm in January 1991. As for the 2003 Iraq War, oil prices sold off at the war’s onset, bottomed in April, and only surpassed 1990 highs in 2004.

“These patterns suggest that while oil price spikes and equity market dips are common, they are often short-lived. The current market response, with modest declines in U.S. equities and contained volatility, so far aligns with this historical precedent,” Shipley said.

Over the course of the war between Israel and Iran, the CBOE Volatility Index (VIX), often called the market's "fear index," jumped from 17 to 21 before round tripping back to 17 in the wake of President Donald Trump's ceasefire announcement.

Risk reaction

Finally, Mike Martin, vice president of market strategy at TradingBlock, believes market participants have not proven to be overly complacent regarding the recent Middle East war at all. In his opinion, the resolution of Iran’s nuclear concerns may very well push markets to new highs, as evidenced by the huge rally on the tail of a truce between Israel and Iran.

“Markets do a phenomenal job of pricing in risks, and Iran’s growing nuclear threat is undoubtedly a risk. Stopping them had to be done, the real risk would be waiting another few years to give them a potential point of no return,” Martin said.