Wars and Rumors of Wars: How to Think Like a Long-Term Investor

The world has rightly reacted to the Russian attack on Ukraine with universal condemnation (except, of course, the leaders of North Korea, Iran, and China). From what we can tell, the Ukrainian military is putting up a determined, courageous defense of their homeland, even while many of their citizens have fled to the safety of neighboring Poland and Romania. The images of the destruction and suffering are truly heartbreaking.

While the ultimate outcome of Putin’s War is still uncertain, what is certain at times like these is that global capital markets will react to such events on a moment-by-moment basis, as market participants of all kinds digest every scrap of news as it is released. Public markets are reasonably good at processing news, meaning that asset prices change in response to the net collective wisdom of buyers and sellers, on the margin. This happens continuously around the globe. But markets hate uncertainty, and a crisis like this creates volatility in stock prices.

As most of you know by now, a key tenet of the investment philosophy at Coyle Financial Counsel is that we seek to be long-term investors. But how are we to think of a crisis like this which has already caused the price of crude oil to jump to $130 per barrel, potentially adding to world-wide inflation? What will be the outcome of all the sanctions being imposed on Russia, given their global position in commodity supply chains, not to mention the prospects for Ukraine’s wheat harvest this year? What impact will the war have on the growth prospects for Europe, which gets roughly 25% of their oil and 40% of their natural gas from Russia[1]?

We can feel our fear and anxiety rising as we immerse ourselves in these and a thousand other questions with no immediate answers in sight. How are long-term investors supposed to process all this? How should they think?

First, we should put times like these in some historical perspective. Investment firm Vanguard recently looked at 22 major geopolitical events since 1956 that triggered a stock market sell-off (using the Dow Jones Industrial Average) and calculated that, on average, the market was up 5% six months later and up 9% one year after the event[2].

Does this mean that we shouldn’t pay attention to world events? Not at all, but research like this can help keep us from panic selling. It can be tempting for investors to take “risk off the table” when major geopolitical events occur. The problem is that there will always be something to worry about, even after the crisis has passed. Investing in the capital markets is never risk free (if only it were that easy). There is no return without taking risk and if you sell out of fear of the unknown, the longer you are out of the market, the greater the chance that you will miss out when the market recovers.

Here is a chart that illustrates what would have happened if you missed being invested during the 25 best trading days since the beginning of 1999[3].

The text box embedded in the chart is worth re-reading: “In the last 20+ years, 21 of the 25 worst trading days were followed, within a month, by one of the best trading days.” It is next to impossible to successfully time the markets to avoid sell-offs, while also capturing the market bounce-back.

By now you may be thinking that it is all well and good to say that long-term investors should always be rational in their investment decision making. We get it, intellectually speaking. But we are not robots, are we? We are most definitely emotional human beings. While emotions like fear, anxiety, and worry may rise up, unbidden, more naturally to some than others, we all experience them. Nobel-prize winning psychologist Daniel Kahneman says that we are all subject to many cognitive biases that can distort our judgement and that our “emotions shape the way in which we think and make decisions; emotions precede logic, not the other way around.[4]“ Like the old Star Trek TV series, we are much more like the emotional Dr. McCoy than the ultra-rational Vulcan, Mr. Spock.

How do we resolve this conundrum of wanting to be rational but knowing that our emotions are often in the driver’s seat of our decision making? Allow me to offer the advice of two Protestant theologians, Dr. Martyn Lloyd-Jones and Martin Luther. Lloyd-Jones writes that “our danger is to submit ourselves to our feelings and to allow them to dictate to us, to govern and to master us and to control the whole of our lives.” He counsels us to stop “listening to yourself and start talking to yourself.[5]“ This means that we should question our own anxieties and ask ourselves if there is a reasonable or factual basis for them. Martin Luther put it this way, in referring to controlling temptations, “You cannot keep birds from flying over your head, but you can keep them from nesting in your hair.[6]

Most of the things we worry about never happen. As the saying goes: “Today is the tomorrow you worried about yesterday.” But let’s face it: we are emotional beings, and our emotions can sometimes get the best of us. As long-term investors, we must try to remember not to let our fears and worries “nest in our hair.” We must endeavor to think probabilistically and realistically about geopolitical events as they occur, while, at the same time, not allow our emotional side to derail our long-term investment objectives.

John Finley



John Finley, CFA, serves as Chief Investment Officer for Coyle Financial Counsel and is responsible for overseeing the investment process. John’s prior experience includes managing institutional fixed-income portfolios for corporations, pension funds, non-profit organizations and foundations at several large, global asset managers. With more than 20 years of institutional investment experience, he is energized by helping individuals understand the role investing plays in meeting their long-term financial goals.
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All information is from sources deemed reliable, but no warranty is made to its accuracy or completeness.  This material is being provided for informational or educational purposes only, and does not take into account the investment objectives or financial situation of any client or prospective client. The information is not intended as investment advice, and is not a recommendation to buy, sell, or invest in any particular investment or market segment. Those seeking information regarding their particular investment needs should contact a financial professional. Coyle, our employees, or our clients, may or may not be invested in any individual securities or market segments discussed in this material. The opinions expressed were current as of the date of posting but are subject to change without notice due to market, political, or economic conditions. All investments involve risk, including loss of principal. Past performance is not a guarantee of future results.

Copyright © 2022 Coyle Financial Counsel. All rights reserved.

[1] DoubleLine International Fixed Income Team – Statement on Russia/Ukraine, March 3, 2022

[2] Vanguard Financial Advisor Services (email received 02/28/22)

[3] AMG Funds (email received 02/01/22)

[4] Quoted in Rational Investing, by Hugues Langlois and Jacques Lussier, p. 182 (Columbia Business School, 2017)

[5] Spiritual Depression: Its Causes and Cure, D. Martyn Lloyd-Jones (Eerdmans, 1965)

[6] By Faith Alone-Martin Luther, James C. Galvin, General Editor (World Bible, 1998)


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