When stock markets swing sharply, many investors look for ways to protect retirement savings—sometimes by moving out of risk assets. But the Associated Press reported that the historical pattern of steep drops followed by recoveries has often favored investors who remain invested, especially when the money is not needed soon.
The latest round of anxiety is tied to war-related pressure on energy markets and the resulting uncertainty for the broader economy. The AP story described how the Iran war is slowing the global flow of oil and driving extreme moves in markets, including by disrupting shipping through the Strait of Hormuz, a narrow waterway off Iran’s coast that carries a substantial portion of the world’s oil.
AP said that traffic in the Strait of Hormuz has slowed enough to push oil prices to as high as $119 per barrel at times, up from roughly $70 before the fighting started. It also reported that the oil shock could intensify if the conflict continues, noting a forecast from strategists at Macquarie.
In that scenario, the AP story said Macquarie strategists expect oil prices could reach $200 per barrel if the war lasts until the end of June. The story also pointed to the 2008 record, described as just above $147, to frame how high prices could go. It further said elevated oil costs would likely extend beyond gasoline prices to influence businesses that rely on trucks, ships or planes for moving goods, and to raise the cost of electricity from gas-fired power plants.
The market moves have reflected that energy-driven uncertainty, according to the AP account. The S&P 500, AP reported, fell for a fifth straight losing week—its longest such streak in nearly four years—and is back near levels it reached in August. The story said the index is about 8.7% below its record set earlier this year, while the Dow Jones Industrial Average and the Nasdaq composite each have already dropped more than 10% from their own records, a level professional investors often label a “correction.”
AP also emphasized the character of the trading week itself: it said the U.S. market yo-yoed as hopes rose and fell about whether the war might end sooner. It described the pattern as unsettling not only because of how far stocks have fallen, but because the swings have been frequent.
The AP story framed that kind of pullback as part of a regular market cycle. It said the S&P 500 has declined by at least 10% every year or two and has often been viewed by experts as a culling of optimism—an adjustment that can prevent stock prices from running too far ahead. Ann Miletti, head of equity investments at Allspring Global Investments, told AP, “I believe getting a correction is not a bad thing,” adding, “In some ways, I feel like that is what keeps the market from having a bigger issue.” Miletti said, “It keeps all of us honest.”
For investors deciding what to do, the AP story laid out different considerations depending on time horizon and whether someone can afford to absorb losses. It said that selling stocks or moving 401(k) investments into bonds may reduce exposure to big drops, but it can also force investors to time when to re-enter the market, which AP said is difficult and can lead people to miss recoveries. It said it is often better to keep money that might be needed in the short term out of stocks, and it also cautioned that emergency funds should not be invested in equities.
AP’s guidance varied by group. It said younger investors often have decades until retirement, meaning they can ride out the swings and benefit if their stock portfolios recover before compounding grows them further, describing price drops as potentially akin to stocks going on sale. For those closer to retirement, the AP story said investors may have less time for rebounds and, in retirement, some withdrawals after a downturn can reduce compounding potential over the long run—particularly for people who need their investments to last 30 years or more.
The story also addressed circumstances where an immediate need for cash is unavoidable. It said that for those who must raid a 401(k) now, selling stock and withdrawing cash can create a “double whammy,” including potential taxes and a possible 10% early-withdrawal penalty, while also removing the chance that investments will recover and grow. It added that while a 401(k) loan is possible in some cases, those loans have their own complexities and potential penalties.
It also noted that defined-benefit pensions, which few U.S. workers still have, can reduce exposure to these market swings because they provide a defined payment regardless of what stocks do. And it described how the market’s “safer” assets can behave differently during this cycle: it said Treasury prices have been hurt by worries about high oil prices and inflation, pushing the 10-year Treasury yield above 4.40% from about 3.97% before the war began, while gold has struggled as higher bond yields make gold’s lack of interest payments less attractive. As with the market’s broader volatility, the AP story concluded there is no certainty about how long the stress will last, urging readers not to accept claims of guaranteed timing.
Related coverage on this theme continues in an earlier MSI story. MSI previously reported how “it can pay for investors to be patient” when markets get shaken, and the logic of avoiding hasty timing decisions remains a key part of that earlier reporting here.