Sector & Factor Performance During Wartime

Better than perhaps expected.

November 2022. Reading Time: 10 Minutes. Author: Nicolas Rabener.

This research note was originally published by the CFA Institute’s EI blog.


  • The S&P 500 increased during two of the three largest wars of the United States
  • Value, size, and momentum factors had positive returns during WW II
  • The top and worst-performing industries during WW II were diverse


Before 2020, the threat of a global pandemic shutting down the world economy was not a top-of-mind concern for most investors. Pandemics were nothing new, of course, but no outbreak in recent history had suggested anything near the magnitude of COVID-19. SARS had broken out in 2002 and Ebola in 2014, for example, but both were contained rather quickly, and their corresponding toll in economic disruption and human lives hardly hinted at what COVID-19 would bring.

Before 2022, even fewer investors saw a third world war as a serious possibility. And while such an outcome is still very unlikely, the Russian invasion of Ukraine has increased the odds. A limited nuclear exchange, let alone a global nuclear war, would have enormous consequences for humanity as a whole to say nothing of the securities markets. Nevertheless, it is worth considering what a simple escalation of the current conflict might entail (read Black Swans, Major Events & Factor Returns).

Intuitively, war implies economic damage and falling stock markets. But so does a global pandemic. Yet the S&P 500 was significantly higher one year after COVID-19 went global.

Which raises the question: How do stocks — specifically sectors and factors — perform during times of war?


To answer this question, we analyzed the US stock market, which has the best dataset for individual securities and indices. In particular, we evaluated the performance of US stocks during three of the country’s most significant wars: the US Civil War, from 1861 to 1865; World War I, from 1917 to 1918; and World War II, from 1941 to 1945.

These three wars had major implications for the US population and economy. Countless thousands died. Infrastructure was both built and