The new war between Israel and Palestinian militant group Hamas has brought more uncertainty to the markets.
While stocks shook off the conflict in Monday afternoon trading, financial experts say investors should stay the course amid elevated volatility risks.
"Stay calm, think long term and look for some bargains," said David Rea, president of Salem Investment Counselors in Winston-Salem, North Carolina, which is No. 27 on the 2023 CNBC FA 100 list.
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Ongoing pressures from two wars, including the Russia-Ukraine conflict; rising interest rates; high inflation; a potential federal shutdown; and ongoing worker strikes may prompt yet more ups and downs.
If markets do drop, investors focused on retirement and other goals would be wise to hold on, research shows.
A $10,000 investment in the S&P 500 would have grown to $64,844 between Jan. 1, 2003, and Dec. 30, 2022 — a 9.8% return, according to research from JPMorgan Asset Management.
If investors had exited that investment to try to avoid losses, they would have sacrificed a meaningful amount of gains, according to the firm.
If an investor moved in and out of the markets and missed the 60 best days, their investment would be worth just $4,205 at the end of that time period, with a -4.2% return.
Trying to time the market doesn't work
The reason why timing the market doesn't work, according to JPMorgan, is that the market's worst days tend to be followed by its best days. If investors leave to avoid the losses, they often don't make it back in time to reap the benefit of the gains.
In the two-decade period, seven of the 10 best days happened within two weeks of the worst 10 days, JPMorgan found. Moreover, the second worst day of 2020, March 12, was immediately followed by the second best day of the year.
"It's so hard to know when it's going to turn and go back up," Rea said.
In the immediate aftermath of the current Mideast conflict, some sectors are already up.
"The winners are clearly energy stocks and likely defense stocks," said Barry Glassman, a certified financial planner and founder and president of Glassman Wealth Services in Vienna, Virginia. Glassman is a member of the CNBC FA Council.
However, the real question for the U.S. economy now is where interest rates will go from here, Glassman said.
When this kind of conflict has emerged in the past, Treasurys have jumped in value while interest rates have dropped, he noted.
"A global conflict that would cause a rush to safety might put interest rates down," Glassman said. "On the first day of trading, we're just not seeing that at this stage."
Notably, due to the Columbus Day federal holiday, bond markets were closed Monday.