On November 11, 1918, the Allies and Germany signed an armistice marking the end of the Great War (July 1914 – November 1918), now known as World War I. The war had spanned four years and resulted in immense casualties on all sides. An estimated 65 million people fought in World War I. Among them, approximately 8.5 million are thought to have been killed and estimated civilian deaths add an additional 13 million to the tally.
Armistice Day, now known as Veterans Day in the US, is a time to honor all military veterans. It’s also a time to reflect not just on the humanitarian costs of global wars, but also on their economic costs. German, French, British and other European economies suffered heavily throughout World War I. While the US exported many wartime goods to Europe, the US also bore significant costs after officially entering the war in 1917. The US National Bureau of Economic Research estimates World War I cost America about $32 billion, which amounted to 52% of gross national product at the time.
While all wars and armed conflicts have steep humanitarian and social costs, we often remind our readers and clients that smaller, regional conflicts usually do not have the broader economic impact to trigger a global recession or a bear market. A war generally needs to include multiple world powers and be global in scale—much like World War I—to derail a bull market. Remembering this can provide some comfort and steady investor worries when smaller, regional conflicts arise.