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CONTRIBUTORS

Chris Galipeau

Senior Market Strategist
Franklin Templeton Institute

The US-Iran war has pushed oil and gas prices sharply higher. Persistent uncertainty about how the situation will resolve continues to drive volatility across asset classes.

Investors may be tempted to pull back and wait for greater clarity. Yet any short-term advantage which pulling back might confer has to be weighed against how that decision could hurt long-term performance.

Gains happen fast and defy attempts at market timing

What opportunities could investors miss coming out of periods of market volatility? The biggest gains in stocks typically have been concentrated in a handful of days each year. Even investors poised on the sidelines looking to re-enter the market can easily miss opportunities that are critical to long-term portfolio returns.

To see how important that is, consider what happens when we exclude the 10 days with the biggest S&P 500 Index gains out of an entire decade.

The impact of missing those trading days—less than 1% of the trading days over a decade—can be enormous. In the 2010 decade, missing those top 10 days would have shrunk a portfolio’s average cumulative return by more than half (95% vs. 190%). And the difference is even starker so far in the 2020s—missing the best days would have meant an 11% vs. a 112% return.

Missing the Market’s 10 Best Days Hurt in the Long Run

 

Cumulative S&P 500 Index Price Return

Cumulative Return Excluding 10 Best Days Each Decade

Average since 1930

114%

41%

1930s

-42%

-79%

1940s

35%

-14%

1950s

257%

167%

1960s

54%

14%

1970s

17%

-20%

1980s

227%

108%

1990s

316%

186%

2000s

-24%

-62%

2010s

190%

95%

2020s

112%

11%

Sources: S&P, FactSet. Data as of December 31, 2025. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges. Performance for decades is for the period beginning January 1 of the first year of each decade (such as 1930, 1940, 1950, etc.) through December 31 of the end of each decade (such as 1939, 1949, 1959, etc.) No assurance can be given that any forecast, projection or prediction regarding economies or financial markets will be realized.

Bouncing back for more

Staying invested can mean tolerating some short-term pain. Yet stocks often bounce back with solid gains as soon as one year after a geopolitical news event sinks the market. Our exclusive analysis of 55 such events since 1929 shows an average gain of 10% for the S&P 500 one year down the road.

Another way to look at this phenomenon is to check equity returns following a major spike in the CBOE Volatility Index (VIX), a common proxy for investor anxiety which reflects the market’s expectation of 30-day volatility in the S&P 500. Higher readings reflect higher investor uncertainty, or “fear.” The Franklin Templeton Institute looked at what happened after instances in which the VIX rose past levels of 30 (high) and 50 (very high).

They found returns were positive in the great majority of one-year periods that followed—and averaged well above 20%.

S&P 500 One-Year Return Following VIX of 30 or Higher (Weekly Close)

January 1, 1990 to February 23, 2026

Median one-year forward return

23.46%

Average one-year forward return

22.98%

Hit rate (% of positive returns)

88.57%

Source: Franklin Templeton Institute, Macrobond, CBOE, S&P Global. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.

S&P 500 One-Year Return Following VIX of 50 or Higher (Weekly Close)

January 1, 1990 to March 27, 2026

Median one-year forward return

24.06%

Average one-year forward return

28.67%

Hit rate (% of positive returns)

100%

Sources: Franklin Templeton Institute, Macrobond, CBOE, S&P Global. Past performance is not a guarantee of future results. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.
 

Every investor, of course, has to recognize the complex crosscurrents impacting the markets now and find the right balance for their needs. In doing so, it’s important to recognize the true costs and benefits involved in any attempt to time the market’s response to complex macro events like the US-Iran war.

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Equity securities are subject to price fluctuation and possible loss of principal.

Large-capitalization companies may fall out of favor with investors based on market and economic conditions.

Performance of a portfolio may vary significantly from the performance of an index, as a result of transaction costs, expenses and other factors.

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