As the conflict continues, is it time to sell stocks?

The last month will have been disconcerting for investors, especially those new to financial markets.

With the S&P 500 in the US falling for five consecutive weeks, the index is close to ten per cent below its recent highs.

Those who entered the fray in late 2025 might be feeling slightly anxious.

Some will be tempted to sell out, cutting their losses in case the conflict escalates and markets fall further.

If you’re a trader with a time horizon that’s measured in weeks or months, maybe that’s the right approach.

However, if your foray into share investing is part of a longer-term strategy you’ve got a more difficult decision to make.

If you’re in this camp, you’ll presumably want to re-enter the market when all this blows over.

That means you’ll not only need to decide whether now is the right time to bail, but also when you should get back in.

If you prefer to listen to a podcast episode on this topic: 

We usually think of a correction as a period when the sharemarket falls more than ten per cent from a recent peak.

For the S&P 500 index is the US, there have been 12 such occasions since 2000.

The average decline across all 12 has been 20.8 per cent, with an average duration (from top to bottom) of eight months.

Four of those 12 corrections have turned into a bear market, which is generally considered a decline of 20 per cent or more.

Three of those came in the wake of US recessions – during the dotcom crash of 2000-2002, the GFC in 2007-2009 and the pandemic-related lockdowns of 2020.

The fourth came in 2022, when the US Federal Reserve lifted interest rates from near-zero to a 20-year high of 5.50 per cent in the space of 18 months.

That was in response to high post-pandemic inflation, and while no recession was declared it was a very challenging period.

The sharemarket falls were much bigger in those four examples, whereas the other eight saw an average decline of 15.3 per cent with an average duration of four months.

The first point to note is that these periods come quite frequently, so we need to get used to them.

In rough terms, a correction is likely every two years and every third one of those might turn into a bigger decline.

History also tells us that when things turn from slump to recovery, they can turn very quickly.

In the first month after the bottom, the average return across those 12 examples is 13.2 per cent.

After three months it’s 24.9 per cent and after 12 months 35.8 per cent.

Unless you’re extremely good, you won’t recognise a market bottom until it’s behind you.

That means by the time you jump back in, you’ll have missed a fair whack of that rebound.

Financial markets look forward.

They take all the information at hand, form a collective judgment about the future, then factor that into today’s prices.

Right now, prices are reflecting increasing challenges on the horizon, even though we haven’t seen all of those show up in the economic data or earnings releases just yet.

Higher fuel costs, slower economic growth, rising inflation and the potential for tighter monetary policy.

That’s an ugly combination, which is why investor sentiment has turned sharply negative.

It’ll be the same on the way back up, whenever that is. The bottom will come long before we see firm evidence of a clear path ahead.

The US market fell 18.9 per cent in the wake of last year’s tariff announcements, but the decline started well before “Liberation Day” on April 2.

The market bottomed just four trading days later and started recovering, long before the actual impact of the tariffs had time to feed through.

It’s impossible to predict if the conflict in Iran will pause or reignite, or to pinpoint how markets will react.

At some markets will stablise and then recover, as they always have, and nobody rings a bell to tell you when that is.

Whether you get off now or stick around for the ride is up to you, but first consider what you’re trying to achieve and if you’re good enough to also get back in at the right time.

You might be better off to strap in and stay put.

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