The recent turbulence in stock markets naturally prompts concerns about safeguarding retirement savings. However, historical precedent suggests that a calm approach has typically yielded the best results.

The U.S. stock market boasts a proven track record of recovering from every significant downturn it has faced. From global financial crises to trade disputes or military conflicts, the S&P 500 has consistently recouped its losses, often pushing towards new records.

While such recoveries can span several years, peoples who divested their pension investments from equities risked missing out on subsequent rebounds and further gains.

While future outcomes remain uncertain, many professional investors and strategists maintain their long-standing advice. For capital not required in the short term – which should ideally never be held in equities in the first place – patience is key to weathering market fluctuations, despite the inherent difficulty.

This echoes advice given during past periods of instability, such as after President Donald Trump introduced global tariffs last year, following the surge in inflation in 2021, and when Covid-19 disrupted the global economy in 2020.

Enduring these kinds of shocks is often the prerequisite for accessing the superior long-term returns that equities can offer.

Extreme swings

The war in Iran is slowing the global flow of oil and causing extreme swings in markets.

The fighting has halted most of the traffic in the Strait of Hormuz, a narrow waterway off Iran’s coast where a fifth of the world’s oil sails on a typical day. That has sent oil prices as high as $119 per barrel occasionally, up from roughly $70 before the fighting started.

If the war continues until the end of June, strategists at Macquarie say the price of oil could reach $200 per barrel. The record is just above $147, reached during the summer of 2008.

If oil prices stay high a long time, the effects would stretch far behind higher prices at gasoline pumps. It could also push businesses that use any trucks, ships or planes to move their products to raise their own prices. It would also make electricity from gas-fired power plants more expensive.

Adding up

The S&P 500 is on track for its fifth straight losing week, which would be its longest such streak in nearly four years. It’s roughly back to where it was in August, and it’s nearly 8% below its all-time high set early this year.

The Nasdaq composite, which focuses more on technology stocks, has already dropped more than 10% from its own all-time high. That’s a steep-enough fall that professional investors have a name for it: a “correction.”

It’s not just how much the market has dropped that’s unnerving, it’s also how unsteady the moves have been. The U.S. stock market yo-yoed repeatedly through this past week as hopes rose and fell about a possible end to the war.

History repeating

The U.S. stock market doesn’t often behave exactly like this, but it has a regular history of falling to steep losses before rising again.

The S&P 500 has seen a decline of at least 10% every year or two. Often, experts view them as a culling of optimism that could otherwise run overboard and drive stock prices too high.

“I believe getting a correction is not a bad thing,” said Ann Miletti, head of equity investments at Allspring Global Investments. “In some ways, I feel like that is what keeps the market from having a bigger issue.”

“It keeps all of us honest,” she said.

Should you sell now?

Selling your stocks or moving your 401(k) investments away from stocks and into bonds may offer less chance of seeing huge drops. But getting out of the market would also mean having to figure out the right time to get back in, unless you’re willing to give up any future recovery and gains.

And timing the market correctly is always difficult. Some of the best days in the U.S. stock market’s history have been clustered in among downturns.

Some recoveries take longer than others, but experts often recommend not putting money into stocks that you can’t afford to lose for several years, up to 10. Emergency funds, for things like home repairs or medical bills, should not be invested in stocks.

Advice for those new to investing

Apps on smartphones have made trading easier and cheaper than ever. That’s helped draw in a new generation of investors who may not be used to such wild swings in the market.

But the good news is younger investors often have the gift of time. With decades to go until retirement, they can afford to ride the waves and let their stock portfolios hopefully recover before compounding and eventually growing even bigger. For them, drops in prices may almost be like stocks going on sale.

Advice for those nearing retirement

Older investors have less time than younger ones for their investments to bounce back.

People who have already retired may want to cut back on spending and withdrawals after sharp market downturns, because bigger withdrawals will remove more potential compounding ability in the future. But even in retirement, some people will need their investments to last 30 years or more.

Advice for those who need to raid their 401(k) now

If you have no other choice, you have no other choice. But selling stocks in your 401(k) account and withdrawing cash packs a double whammy. One, you may have to pay tax, as well as a possible 10% early-withdrawal penalty. Two, a withdrawal means no chance of those investments recovering their losses and growing over time.

A 401(k) loan is possible in some cases, but those come with their own peculiarities and possible penalties.

Advice for those with pensions

You don’t have to pay as much attention to any of this. Defined-benefit pensions, which few U.S. workers still have, mean you’re in line to get a defined payment regardless of what the stock market does.

There are some differences

When stocks are falling, prices for Treasury bonds and gold often rise as investors move into investments considered safer. That’s why many advisers suggest keeping a diversified portfolio, to help smooth out shocks.

This time around, though, Treasury prices have been hurt by worries about high oil prices and inflation. That in turn has sent the yield on the 10-year Treasury above 4.40%, up from just 3.97% before the war began.

Gold’s price has also struggled despite its reputation as a safe harbor during uncertain times. That’s because bonds paying more in interest make gold, which pays its investors nothing, look less attractive in comparison.

How long will this go on?

No one knows, and don’t let anyone tell you otherwise.