by Gary Alexander
June 25, 2024
I’m against war and would do anything I could to bring peace to Ukraine, the Middle East and other hot spots, but the sad truth is that we now face threats of escalation into World War III on at least two fronts.
Ukraine’s President Volodymyr Zelenskyy has warned that failure to fend off Russia’s aggression could spiral into a confrontation with NATO nations, saying: “That certainly means the Third World War.”
Russian cruise missile violated NATO airspace right after Putin warned that any direct confrontation between Russia and the Western alliance would be “one step away from a full-scale World War III,” and in response, England and America have provided missiles that reach deep into Russia, so it is clear that the West is fighting a proxy war against a nuclear-rich (yet otherwise poor) paranoid power.
The same kind of missile aid from the West has also escalated within the Middle East in recent months.
For investors, history indicates that (1) as long as we can avoid nuclear war, and (2) the west wins and/or becomes stronger in the postwar world, markets tend to strengthen during and after major wars. To back up this claim, let me tie in today’s date (within a day: June 24-26) to five or six wars in American history.
#1: The Civil War, keyed to the first day of the Seven Days’ Battle, June 26, 1862, in Mechanicsville, VA.
From 1979 to 1982, I lived in Mechanicsville, Virginia, as a free-lance writer for financial newsletters, but that left me plenty of time to tour major Civil War battlefields under the inspiring leadership of Ed Bearss (1923-2020), a wounded World War II Marine veteran and Park Ranger with an encyclopedic knowledge of Civil War engagements. For the Seven Days Battle (June 26 to July 3, 1862), Ed loaded a bus of us up to tour all seven sites in a day, starting on Beaver Dam Creek, near our home. In each site, he would close his eyes and “see” the battle, describing which unit came over which hill, encountering what level of fire. It was like being there. At the end, a Union bugler sounded Taps, the new lament for the dead, on July 4th.
What did the market do from that point forward? There was no Dow index until 1896, but according to The Stock Trader’s Almanac, using Cowles and other indexes, markets rose 55.4% in 1862, 38% in 1863 and +6.4% in 1864, more than doubling (+128%, compounded) in the three core years of the Civil War.
#2: World War I: On June 26, 1917, the first U.S. expeditionary force of 14,000 arrived in France.
America was late to the Great War, “the war to end all wars.” Stock markets in Europe initially closed for much of World War I. German and Russian markets remained closed until 1917, while other European markets opened sporadically. The U.S. market closed for most of the second half of 1914 and only re-opened in stages in the first half of 1915. When the market shut down on July 30, 1914, the Dow Jones Industrial index stood at 53.23. It more than doubled to 110.15 by November 1916, during the time America stayed out of the war, and President Wilson was re-elected, in part, by promising to keep America out of Europe’s conflict.
Despite Wilson’s promises, America entered the war in April 1917 and the market declined on that news, with the Dow falling 21.7% in 1917. When the tide of war began to turn in favor of the West in 1918, the market reversed and rose: +10.5% in 1918 and +30.5% in 1919. In all, from December 19, 1917, to November 3, 1919, the Dow rose from 66 to 120 (+82%) as U.S. forces prevailed and then came home.
#3: World War II: On June 25, 1942: FDR and Churchill named U.S. General Dwight D. Eisenhower Supreme Allied Commander in Europe over the less flexible British General, Bernard Montgomery.
June 1942 was the turnaround month in World War II with the Battle of Midway in the North Pacific, and the naming of General Eisenhower to coordinate the Allied forces in Europe. The actual bottom in the Dow Jones index came on April 28, 1942, shortly after General Jimmy Doolittle’s air raid over Tokyo on April 18. From that point, the Dow more than doubled from 92.92 to 212.50 (+129%) on May 29, 1946.
Dow Gains by Calendar Year
1942 +7.6%
1943 +13.8%
1944 +12.1%
1945 +26.6%
Source: Stock Trader’s Almanac
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
#4: Korean War: On Sunday, June 25, 1950, 200,000 North Korean troops stormed into South Korea.
Just six years after the West’s D-Day on Normandy’s beaches, North Korea, with likely help from the new Maoist regime in China, staged their own surprise D-Day invasion of South Korea, launching the Korean War, giving little or no rest to American soldiers just five years at home after World War II.
The market didn’t suddenly rise after North Korea’s “D-Day” invasion of the south. The next day, the Dow fell by a staggering 4.7% (-10.44 points), to 213.91, the largest one-day drop since 1937, and the worst single-day decline we would see again until 1962. For the week of June 26-30, 1950, the Dow fell 15.24 points (-6.8%), to 209.11, the worst weekly drop since the 1930s. But the market soon took off.
Dow Gains by Calendar Year
1949 +12.9%
1950 +17.6%
1951 +14.4%
1952 +8.4%
Source: Stock Trader’s Almanac
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The Longest (and Coldest) War Started in 1948
#5: The Cold War: On June 24, 1948, the blockade of Berlin began, leading to the Berlin Airlift.
After the Soviet Union began its blockade of their section of Berlin, buried within their section of East Germany, within a year, 277,000 Allied flights delivered over 2.3 million tons of supplies to Berlin. On the same day in 1948, President Harry Truman also signed the Selective Service Act, calling for all males, age 18-22, to register, for the draft, perhaps anticipating the next hot war in a new, longer-term cold war.
One angle of the Berlin Airlift is that the Soviet blockade may have been caused by currency reforms:
“Currency reform, planned under the name Operation Bird Dog, involved the replacement of [the old German] Reichsmarks with new Deutsche mark (DM), printed in Washington at an exchange ratio of 1000 Reichsmarks = 65 DM. The new currency would be legal tender in the Western zones and its supply would be outside Soviet control. The Soviet Union viewed this as a part of an overall American plan to set up a separate West German government that would be ideologically opposed to the Soviets. On the day the new currency was to go into circulation in Berlin’s Western zones, the Soviet military blockaded the city” (causing the airlift?)
–From “International Financial Markets,” by J. Orlin Grabbe, page 10.
One sadder set of wars had no impact on markets, but it may have caused an election year panic in 1876:
#6: Indian Wars: On June 26, 1876, Custer’s Last Stand at Little Big Horn ended his Presidential dreams.
Civil War boy general, the golden-haired George Armstrong Custer, intended to ride President Grant’s coattails into the Presidency, but he had a bad hair day. The young general got scalped at Little Big Horn, Montana, thinking he was in the midst of a glorious Presidential juggernaut run. What happened instead was an extremely contentious election that ended up sabotaging Reconstruction and dividing the nation.
That’s not a wild excursion into historical revisionism. Republican Civil War generals dominated the White House for 35 years after the Civil War ended: In order, we had General Ulysses S. Grant (in office 1868-76), Major General Rutheford B. Hayes (1876 to 1880), Major General James A. Garfield (elected 1880), General Chester A. Arthur (President, 1881-85), Brigadier General Benjamin Harrison (President, 1888-92) and Brevet Major William McKinley (President, 1897-1901). From Lincoln to Taft, there were eight Republican Presidents, including six Civil War officers, and only one Democrat, Ben Harrison.
The bottom line is that a serious war is terrible news, and I would hope a cease fire and/or truce would end today’s conflicts but, barring that, man’s eternal foolishness is unlikely to keep market from rising.
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Bond Traders (Not the Fed) Control Interest Rates
Income Mail by Bryan Perry
The Torrid AI Rally Takes a “Pause That Refreshes”
Growth Mail by Gary Alexander
Keep Investing – Even During World War III
Global Mail by Ivan Martchev
More European Political Fireworks Are Coming
Sector Spotlight by Jason Bodner
Try Not to Track Stock Prices Daily
View Full Archive
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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