The Uneasy Reality of Investing During Conflict
This is a continuation of my April 2026 client newsletter:
War is destructive. Full stop.
And yet, history shows that periods of conflict and geopolitical tension often coincide with increased government spending, industrial production, and economic activity tied to defense and energy. That spending doesn’t disappear; it flows through the system. It shows up in company revenues, wages, supply chains, and ultimately, markets.
That creates a form of cognitive dissonance for investors.
You can deeply oppose what’s happening in the world… and still benefit from owning broadly diversified businesses that participate in the global economy.
That doesn’t make it comfortable. But it does make it real.
And it reinforces something important about how markets work:
Markets are not moral instruments. They are pricing mechanisms.
They continuously incorporate all available information—good and bad—and translate it into expected future cash flows.
Why Predicting the Narrative Rarely Helps
One of the most common instincts during times like this is to try to “figure out what happens next.”
Will oil prices spike?
Will markets fall further?
Should we reduce risk until things settle down?
The challenge is that even when we feel confident in a narrative, markets don’t move in clean, predictable ways.
Take oil, for example. We’ve already seen sharp moves tied to geopolitical developments this quarter. But the relationship between oil prices and stock returns is far weaker than most people assume. Over long periods, that connection has been noisy and inconsistent, with many outcomes that don’t match the headline story.
In other words, even if you “get the story right,” it doesn’t necessarily translate into better investment decisions.
There are simply too many variables at play.
Uncertainty Is Not a Bug. It’s the Feature.
This is where I think a small but important mindset shift helps.
We tend to view uncertainty as something to avoid. But in investing, uncertainty is actually the reason returns exist in the first place.
If outcomes were known and predictable, there would be no reward for taking risk.
As Dimensional put it well, uncertainty isn’t an obstacle to investing—it’s the entry point. It’s the price we pay to participate in the long-term growth of businesses and the global economy.
That doesn’t mean volatility is enjoyable. It rarely is.
But it does mean that periods like Q1 are not deviations from how markets work. They are how markets work.
What We’ve Seen in Markets So Far This Year
Despite a volatile start to the year, a few important patterns have continued to play out beneath the surface:
Returns have broadened beyond the largest U.S. companies. After a prolonged period of concentration, smaller companies and more attractively priced (“value”) stocks have shown relative strength.
Diversification is doing its job. While headlines tend to focus on a handful of large names, globally diversified portfolios have experienced a much wider range of outcomes across regions and sectors.
Short-term movements remain unpredictable. Even within a single quarter, we’ve seen sharp swings tied to evolving expectations around inflation, rates, and geopolitical risk.
For clients of Lighthouse Planning, this matters because of how portfolios are intentionally constructed.
We tilt toward smaller and value-oriented companies, not because they outperform every quarter (or even every year), but because over long periods, they have historically offered higher expected returns as compensation for bearing different types of risk.
That doesn’t show up smoothly. It shows up unevenly, often when it’s least expected.
But Q1 has been a reminder that leadership in markets does rotate, and diversification beyond the most visible parts of the market continues to matter.
A Grounding Principle Moving Forward
In February, I wrote about how investing ultimately comes down to owning productive assets—businesses that generate real goods and services over time.
That idea feels even more relevant right now.
Because every time we consider stepping away from markets due to uncertainty, we’re making an implicit trade:
We’re exchanging ownership in those productive assets for cash.
And in an environment where the global system continues to expand, adapt, and redeploy capital—even in difficult times—the long-term case for staying invested remains grounded in that simple reality.
Final Thought
There’s no clean way to wrap a topic like this. War is tragic. Markets are indifferent. And as investors, we operate in that tension.
What we can control is how we respond:
Staying disciplined when uncertainty rises
Avoiding the urge to make short-term predictions
Continuing to align portfolios with long-term goals
Progress in investing rarely feels comfortable in the moment. It tends to feel uncertain, uneven, and occasionally unsettling.
But over time, it’s that willingness to stay the course—through periods exactly like this—that has historically been rewarded.
As always, if you have questions about what you’re seeing, feeling, or wondering about in your portfolio, I’m here for it.
This is for informational and educational purposes only and should not be considered investment, tax, or legal advice. Investment decisions should be made based on your individual circumstances in consultation with your advisor. Past performance is not indicative of future results.
Sources and inspiration include research from Dimensional Fund Advisors and market commentary from industry peers.”