Market Unfazed by Geopolitical Tensions: Top ETFs for Diversification and Growth in a Volatile World

The recent U.S. involvement in the Israel-Iran conflict has raised concerns about potential geopolitical tensions and their impact on global markets. However, despite the heightened tensions, investors and markets have remained largely composed, with a notable lack of aggressive reactions compared to previous events of this nature.

Market Reactions

Contrary to expectations, the U.S. strikes on Iranian nuclear facilities have not triggered a significant rush into safe-haven assets. Instead, markets have reacted far less aggressively than they did to Israel’s strikes on Iran just over a week ago. Industry experts agree that the latest developments in the conflict do not pose a systemic threat to global markets.

According to Dan Ives, managing director at Wedbush, the escalating conflict in the Middle East is expected to be isolated to the region, making the region more stable as the nuclear threat is neutralized. Similarly, strategists at Morgan Stanley note that market selloffs triggered by geopolitical events tend to be short-lived.

Investment Implications

Despite the current tensions, the historical performance of the S&P 500 after such events suggests that investors should maintain a long-term perspective. The S&P 500 has posted average gains of 2% after one month, 3% after three months, and 9% after a year following such geopolitical risk events.

Investors can consider increasing their exposure to funds tracking major indexes like the S&P 500, which provide growth potential and diversification. Some of the top options include Vanguard S&P 500 ETF (VOO), SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), SPDR Portfolio S&P 500 ETF (SPLG), and Invesco S&P 500 Equal Weight ETF (RSP).

ETF Options

VOO, SPY, and IVV are among the largest funds in the United States, with VOO having the largest asset base of $681.56 billion. Both VOO and IVV are suitable for long-term investing, charging 0.03%, and sporting a Zacks ETF Rank #1 (Strong Buy). SPY is the most liquid option, with a one-month average trading volume of about 73.88 million shares, offering investors easier entry and exit while minimizing the risk of significant price fluctuations.

In conclusion, while the U.S. involvement in the Israel-Iran conflict is a significant development, it does not pose a systemic threat to global markets. Investors should maintain a long-term perspective and consider increasing their exposure to funds tracking major indexes like the S&P 500 for growth potential and diversification.