When stock markets get shaken, patience often pays

Lead

New York — Recent manic swings in U.S. stock markets have many investors tempted to shield retirement savings, yet long-term history favors staying invested. The S&P 500 has repeatedly recovered from steep declines tied to crises — from financial meltdowns to pandemics — although recoveries can take years. The recent Iran-related disruption pushed oil briefly toward $120 per barrel and amplified intraday volatility, but the index remained about 4% below its all-time high as of Thursday morning. Financial advisers warn that moving out of stocks risks missing recoveries and the subsequent gains for long-horizon money such as 401(k) accounts.

Key takeaways

• The S&P 500 was roughly 4% below its January all-time high as of Thursday morning, despite sharp intraday swings.
• Oil spiked briefly near $120 per barrel on Monday amid disruptions around the Strait of Hormuz, a waterway that carries about one-fifth of global oil shipments.
• Analysts warned prices could reach $150 per barrel if shipping through the strait remains blocked, a development that could raise stagflation risks globally.
• Several intraday moves recently saw the Dow fall roughly 900 points in the morning only to recover much of the loss by the close.
• The S&P 500 historically records drops of 10% or more about every year or so, events investors and advisers call “corrections.”
• Advisers typically recommend keeping funds you may need within a few years out of stocks; retirement or long-horizon money can usually tolerate volatility.

Background

Equity markets regularly cycle through shocks driven by geopolitics, policy shifts and economic surprises. Over decades the U.S. market has repeatedly bounced back after severe downturns, a pattern that underpins the conventional advice to remain invested for long-term objectives. The recent trigger is a war involving Iran that disrupted tanker traffic near the Strait of Hormuz, reducing flow and prompting storage fills and voluntary output cuts by some producers.

Persistent inflation since 2021 and elevated interest rates have also changed how traditional safe havens behave; Treasury prices and gold have not always moved in predictable, offsetting ways this episode. Meanwhile, easier trading via smartphone apps has broadened market participation, bringing in younger investors who typically have longer horizons and can better absorb short-term losses. For older savers nearing or in retirement, the calculus is different: less runway to recover means decisions on withdrawals and allocation shifts matter more.

Main event

Markets became exceptionally volatile after renewed fighting around Iran slowed traffic through the Strait of Hormuz, prompting concerns about supply bottlenecks. On Monday oil prices briefly touched nearly $120 per barrel — the highest since summer 2022 — amid reports that storage facilities in the region were filling because crude could not move. Several analysts cited in reporting said prices could surge further, with some scenarios putting a $150 per-barrel level on the table if disruptions persist.

The S&P 500’s day-to-day movements have been sharp enough to feel extreme: the index remained close to record territory overall but several sessions featured large intraday reversals. On multiple days the Dow plunged roughly 900 points in morning trading only to claw back much of the loss by the close, underscoring how quickly sentiment can swing. Market strategists told reporters that such extremes often present buying opportunities for long-term investors rather than signals to exit equity exposure.

Advisers reiterated that money needed within a short horizon — emergency reserves or near-term spending — should not be held in stocks, while retirement accounts may remain allocated to equities if the timeframe extends many years. Those newly entering markets via low-cost apps should recognize that volatility is part of equity investing and, for the young, can represent discounted entry points. For retirees, reducing withdrawals and preserving portfolio diversification can help manage sequence-of-returns risk during downturns.

Analysis & implications

From a policy perspective, persistent high oil prices complicate central-bank efforts to tame inflation without choking growth. Economists warn that prolonged supply-driven price spikes can push an economy toward stagflation — slow growth paired with high inflation — a situation with limited monetary-policy remedies. That prospect helps explain why bond yields, equity prices and safe-haven assets have shown atypical correlations during this episode.

Investors who liquidate equity positions to avoid short-term losses face two hard problems: choosing the right time to sell and correctly timing when to re-enter. Historical recoveries often include a small number of very strong days clustered amid declines; missing those days materially reduces long-term returns. As a result, many advisers favor dollar-cost averaging or rebalancing rules rather than outright market timing.

Global spillovers matter: higher energy costs can blunt consumption across advanced and emerging economies, pressuring corporate earnings and heightening recession risk in susceptible countries. For U.S. portfolios, sector composition will influence outcomes — energy companies may benefit from higher oil; consumer-focused firms could see margin squeezes if inflation persists. Portfolio diversification, liquidity planning and an assessment of time horizon remain central to strategy.

Comparison & data

Those two indicators capture why volatility feels acute despite the index sitting near its record: small percentage gaps from highs can coincide with very large intraday swings in dollar terms. The oil move is the clearest new shock factor; if supply through the Strait of Hormuz remains constrained, commodity-driven inflation could become a persistent headwind for growth and risk assets.

Reactions & quotes

Market strategists and investors voiced familiar themes: while volatility is uncomfortable, extreme moves often create long-term entry points rather than signals to exit.

“Volatility in itself tends to be brief when it reaches more extreme levels,”

Anthony Saglimbene, chief market strategist at Ameriprise (quoted in AP)

The reporting also emphasized the limits of prediction.

“No one knows, and don’t let anyone tell you otherwise.”

AP reporting

Unconfirmed

• Some analysts’ forecasts that oil could reach $150 per barrel if the Strait of Hormuz remains closed remain model-based scenarios and are not certain.
• Projections that a prolonged oil shock would inevitably produce stagflation depend on many variables including policy responses and are not predetermined.
• The timing and magnitude of any market recovery following current volatility cannot be predicted with certainty.

Bottom line

The recent episode illustrates two enduring lessons: market volatility can be extreme in the short term, and long-term investors have historically been rewarded for staying invested. For retirement accounts and other long-horizon money, the risk of missing a recovery often outweighs the impulse to flee equities during panicked periods.

That said, individual circumstances matter. Younger investors generally have more capacity to wait out downturns, while those close to or in retirement should review withdrawal rates, diversification and liquidity. In all cases, a clear plan — not reactionary selling — is the most reliable way to manage market shocks.

Sources

• AP News (news report)
• Ameriprise Financial (firm; strategist quoted via AP)