Stocks are often shocked into a quick decline when a major geopolitical event occurs, but the ability to recover has been very different.
With the backdrop of rising tensions between North Korea and the U.S., Strategas Research studied the immediate and longer-term impact on the S&P 500 from a series of key events going back to World War II.
The bombing of Pearl Harbor, for instance, resulted in a 3.8 percent drop in the S&P 500 on Dec. 7, 1941. But within 20 days, the index was up 0.3 percent and after 250 days, had risen 3.7 percent.
There was a worse reaction after 9/11, which triggered a 4.9 percent decline in the S&P 500 on the first day. After 20 days, the market recovered and was up 4.9 percent, but after 250 days, it was down 14.3 percent.
The Lehman Brothers failure sparked a 4.7 percent decline in the S&P 500 on Sept. 15, 2008. The S&P was down 15.9 percent after 20 days, and 12.3 percent lower after 250 days.
When Iraq invaded Kuwait 27 years ago this month, the S&P 500 fell 1.1 percent, and was down 9.3 percent 20 days later. But it was up 10 percent in 250 days.
The resignation of President Richard Nixon — 43 years ago to the day — resulted in a first day 0.9 percent sell-off, but 20 days later, the S&P 500 was down 13.8 percent and up 6.7 percent after 250 days.
With U.S. stocks near record highs, strategists say a pullback is due but so far the North Korean situation does not appear to be a trigger for a major sell-off. However, if the situation becomes more than a war of words or if North Korea becomes more successful with its missile launches, that would change the situation immediately.
Source: Strategas Research
Stock market losses have been slight so far, but selling accelerated Thursday and the Dow was down more than 100 points.
Gold moved higher, the dollar rose and bond yields moved lower Thursday as North Korea dismissed warnings from President Donald Trump and outlined plans for a missile strike near the U.S. Pacific territory of Guam. North Korea indicated it would target Guam after some tough talk from Trump, who threatened U.S. "fire and fury"
"The action from the precious metals and bonds are evident there's some discomfort with the headlines," said Todd Sohn, technical analyst at Strategas Research. As for the modest reversal in the S&P 500 on Tuesday and Wednesday's sell off in stocks, "it's not enough for us to abandon ship here. It's not indicative of a top or anything more sinister yet."
The S&P 500 ended the day flat on Wednesday, but was down double digits on Thursday, trading below 2460.