One of the ways to place a bet on what the smart money is doing next is to examine how they invest historically throughout changing investment cycles.

Russia's invasion of Ukraine in 2022 was the catalyst for this article. Since then, additional conflicts have reshaped portfolio dynamics further. Goldman Sachs published analysis in March 2026 on how the Iran war is affecting investment portfolios, finding relatively muted equity downside but meaningful shifts in gold demand and rate expectations. The core questions have not changed. Which assets hold up? What should you actually do? The evidence from multiple conflicts now gives us sharper answers.

Where War Fits in the Investment Cycle

War does not erase investment cycles. It distorts them, compresses some phases, and extends others in ways that catch most investors off guard.

The standard four-stage cycle runs from expansion to peak to contraction to trough. Conflict typically accelerates the contraction phase by disrupting supply chains, elevating inflation, and creating currency pressure simultaneously. The trough, when it arrives, tends to be sharp and brief. Biggs documented this across WWII market data: the markets recognized the turning point before the analysts did.

Understanding where the cycle is when conflict breaks out determines which preservation strategy is most urgent. Early in a war-driven contraction, liquidity matters most. Deeper into it, non-sovereign assets like gold and commodities tend to outperform. The recovery phase, when it comes, historically rewards investors who stayed in equities rather than those who exited.

An investment cycle could persist for any length of time, from several months to years on end. In general, there are four stages to an investment cycle. These include:

Expansion: The economy is growing and investors are bullish. Valuations on assets from stocks to real estate soar and demand is robust.
Peak: This is the point in the investment cycle when asset prices reach their pinnacle. Demand starts to slow down.
Contraction: The economy begins to narrow, and investor confidence weakens. Asset prices decline and demand slows further.
Trough: The bottom of the investment cycle. Asset prices tumble to their lowest and demand is at its worst.

War and Investing: An Historical Perspective

In his book entitled “Wealth, War and Wisdom,” the late and great investor Barton Biggs explores preserving wealth when “the four horsemen are on the loose.” Biggs, a former money manager at Morgan Stanley, is talking about pestilence, war, famine and death. He discusses how to protect wealth through uncertain times.

According to Biggs, to be worthy of anyone’s investment, whether it’s a family office or institutional firm, an asset class or product should be able to protect wealth during good times and bad. What point is there to accumulating wealth if it’s going to disappear during times of war? The wealthier you become, the more you’re going to have to protect that wealth.

The 20th century was riddled with hard times, including two World Wars and the Great Depression. While hindsight is 20/20, Biggs points out that during the “fog of war,” it’s hard to tell just when the investment tide has turned. He says the equity markets knew when the worst was over, even before the expert commentators did.

Great Britain’s market bottomed in the summer of 1940 leading up to the Battle of Britain
The tide on the U.S. market turned in May 1942 near the Battle of Midway
Germany’s market peaked slightly before December 1941, when Germany declared war on the U.S. on the heels of Japan’s attack on Pearl Harbor.

In each of these instances, only the markets — not the experts — managed to recognize these “momentum changes” in WWII. That’s why, he says, it’s important to “[listen] to what the market is saying by its action.”

Safe-Haven Asset Comparison: What Protects Wealth During War?

Not all safe-haven assets behave the same way under conflict. The table below compares the five most commonly recommended options across the metrics that matter most when geopolitical risk spikes.

👉 Quick takeaway: Gold and commodities offer the strongest inflation protection during conflict, but commodities reverse sharply once a conflict resolves. Treasuries attract flight-to-safety demand yet lose real value when war drives inflation. Cash preserves nominal value only. Alternatives can reduce drawdown but carry illiquidity and fee drag that most investors do not need.

Asset	Typical War-Period Behavior	Liquidity	Inflation Protection	Key Risk	Best For
Gold	Rises during uncertainty; sensitive to real interest rates	🟢 High (ETFs/futures)	🟢 Strong	⚠️ Rate hike cycles can suppress price	Core hedge for most portfolios 🏆 Best all-round wartime hedge
U.S. Treasuries	Flight-to-safety demand lifts prices; yield falls	🟢 Very high	🔴 Weak in high-inflation war	🔴 Inflation erodes real returns	Capital preservation over short-to-medium term 🏆 Best for capital preservation
Broad Commodities	Supply disruptions drive prices up (energy, food, metals)	🟢 Medium-high	🟢 Strong	🔴 Volatile; conflict resolution causes sharp reversals	Tactical inflation and supply-shock hedge 🏆 Best supply-shock hedge
Cash / Short-Term Money Market	Preserves nominal value; loses real value to inflation	🟢 Maximum 🏆 Highest liquidity in table	🔴 None	🔴 Purchasing power erosion	Emergency liquidity buffer, 3-6 months expenses
Alternatives Hedge funds, private real assets	Variable; quality alternatives can reduce drawdown	🔴 Low-medium	⚠️ Moderate	🔴 Illiquidity; high fees Often 1.5-2% management, 20% performance	Sophisticated investors with long horizons

How to read this table: no single asset does everything. UBS recommends combining quality bonds, gold, and commodities as a crisis-era allocation rather than relying on any one hedge. Goldman Sachs analysis of the 2026 Iran war period found relatively muted equity downside alongside shifts in gold dynamics and rate expectations, reinforcing the case for multi-asset positioning rather than a single safe-haven bet.

Does the 60/40 Portfolio Still Work During War?

For decades, a 60% stock and 40% bond portfolio was the default answer for most investors seeking balance. War stress tests that assumption hard.

The IMF published analysis in early 2026 showing that stock-bond diversification offers less protection from market selloffs during periods of geopolitical stress. The core problem is correlation. In a normal recession, bonds rise when stocks fall. During a geopolitical shock, both can fall together, particularly when conflict drives inflation and forces central banks to keep rates elevated. Levered strategies built on risk parity assumptions become especially vulnerable in this regime.

That does not mean bonds are useless. Short-duration, high-quality government bonds still provide a liquidity cushion. The IMF finding is a warning against over-relying on the 60/40 split as a complete solution, not a case for abandoning bonds entirely.

What does work better? The IMF and BlackRock both point to broader diversification that includes non-sovereign stores of value. Gold, real assets, and select commodities fill the gap that bonds cannot cover when geopolitical risk and inflation arrive together.

Insurance as a Wealth-Protection Layer

Most investors think about wealth preservation in terms of asset allocation. Insurance rarely enters the conversation. That is a mistake.

The OECD published guidance in 2026 specifically on insuring against war, covering how investors, businesses, and households can use insurance to maintain economic activity in conflict zones. The key finding is that coverage gaps are the norm, not the exception. Standard property and business interruption policies typically exclude war-related losses. Political risk insurance and trade credit insurance fill that gap but require proactive setup before a conflict escalates.

For individual investors with concentrated exposure to a conflict region, the OECD recommends three practical steps:

Audit existing policies for war exclusions. Most standard policies contain them.
Consider political risk insurance if you hold business assets, real estate, or receivables in geopolitically exposed regions.
Maintain a cash or liquid-asset buffer equivalent to 6 to 12 months of essential expenses. This is not investment advice. It is crisis liquidity management.

For institutional investors and businesses operating in or near conflict zones, the OECD notes that government-backed export credit agencies in many countries offer war-risk coverage that private markets will not.

Markets and War

Biggs in his book says that the markets hold great wisdom, especially when the tide is turning, something investors should ignore only at their own peril. He admits at the time that the next Apocalypse is likely to be different from the one he was focused on.

WWII proved that real assets like gold and jewelry can protect wealth. However, Biggs in a prescient warning urged investors not to keep these assets in safe-deposit boxes. He cautioned centralized banks could buckle under pressure and hand over the keys to these investments to others.

These assets, he continues, are also vulnerable to being destroyed by fire or theft. For example, Poland at the end of WWII reported over 13,000 cases of missing art.

“If the barbarians come next time as a terrorist attack or a plague, you are going to want to have your mad money close at hand.” - Barton Biggs, 2008

Commodities During War: Supply Shocks, Price Spikes, and What to Expect

Since Russia President Vladimir Putin invaded Ukraine, he’s brought the world to the brink of nuclear war. With no sign of a peace agreement in sight, it’s difficult to pinpoint the precise phase of the investment cycle. However, one common theme that can be found among smart money is commodities. Ukraine, for example, is a key producer of commodities like wheat and cooking oil, to name a couple while Russia is a major producer of nickel, natural gas and oil.

As long as the war persists, big investors like hedge funds are anticipating continued volatility in the commodities asset class, which they are more than happy to trade on. It’s being fueled by disruptions in the supply chain and trade flows.

Hedge fund managers are preferring to trade commodities rather than get involved in Russian debt or stocks, where the risks are too high even for them. Bullish bets on commodities have paid off big, with the best funds earning profits in the hundreds of millions of dollars range, shortly after the war in Ukraine began.

Historically, the gold price has gained during times of war. Investors flock to the precious metal throughout conflicts such as the Iran/Iraq war in the late 1970s, the Gulf war in the early 1990s and the events on 9/11, as the below illustration shows.

Gold's relationship with conflict is real but not automatic. After Russia invaded Ukraine in February 2022, gold briefly climbed above $2,000 per ounce before losing roughly 20% of its value by September 2022 as the Federal Reserve raised rates aggressively and the dollar strengthened. That 2022 dip showed something important: gold hedges against uncertainty, not against rate hikes.

By 2024 and into 2026, gold reasserted itself. The World Gold Council projects gold could rise 5% to 15% in 2026, with the range depending on the severity of any economic slowdown and the speed of rate cuts. The IMF notes that gold and other non-sovereign stores of value have gained prominence as safe havens amid 2024-2026 geopolitical volatility, particularly as traditional stock-bond diversification has proven less reliable during geopolitical shocks.

How to Build a War-Resilient Portfolio: A Step-by-Step Framework

Knowing which assets hold up during conflict is one thing. Knowing what to actually do with your portfolio is another.

Step 1: Assess your current geopolitical exposure.

List every asset with direct or indirect exposure to the conflict region. This includes equities in affected sectors (energy, defense, food), real estate, and any fixed income denominated in currencies under pressure.

Step 2: Check your cash buffer.

Before adjusting any investments, confirm you hold 3 to 6 months of liquid expenses in cash or money-market instruments. Liquidity is the first line of defense. Without it, a forced sale of long-term assets at depressed prices locks in losses.

Step 3: Audit your bond exposure.

If your portfolio is heavily weighted toward long-duration bonds, consider rotating toward shorter-duration, high-quality government bonds. The IMF's 2026 analysis shows that long-duration bonds are more vulnerable when conflict drives inflation and delays rate cuts.

Step 4: Add or top up gold.

The World Gold Council's 2026 strategic asset report documents gold's consistent role as a low-correlation diversifier across 1, 3, 5, 10, and 20-year periods. A 5% to 10% allocation is the range most institutional guidance references, though your specific situation determines the right number.

Step 5: Consider a commodity allocation.

Energy and agricultural commodities tend to spike when conflict disrupts supply chains. A 5% to 15% tactical allocation to broad commodity exposure can offset inflation and supply-shock risk. This is not a long-term structural bet. It is a conflict-duration hedge.

Step 6: Review insurance coverage.

See the Insurance section above. One policy audit can identify coverage gaps that no amount of asset reallocation can fix.

Step 7: Commit to a rebalancing trigger, not a panic threshold.

Fidelity and Kiplinger both emphasize that staying invested through war-related volatility has historically outperformed tactical exits. Set a rebalancing rule in advance: for example, rebalance when any single asset class drifts more than 5 percentage points from its target weight. This removes emotion from the decision.

Common Mistakes to Avoid When Markets Are War-Volatile

The behavioral side of wartime investing is where most losses actually happen. The asset allocation is not usually the problem. The reaction to volatility is.

Panic selling at the bottom. Biggs documented this in WWII: the markets turned before the experts recognized it. Selling into maximum fear means missing the recovery. Kiplinger's 2026 analysis echoes this directly, calling staying invested the hardest and smartest choice during war-related volatility.
Chasing conflict-specific plays. When Russia invaded Ukraine, commodity funds saw massive inflows. Many retail investors bought at the peak of the spike. Conflict-specific bets are timing trades, not preservation strategies.
Over-concentrating in gold. Gold is a hedge, not a portfolio. A position that is too large creates a different kind of concentration risk. Most institutional guidance caps gold at 5% to 15% of a diversified portfolio.
Ignoring currency risk. Wars weaken currencies. If your assets are denominated in a currency tied to the conflict region, the nominal value of your holdings can hold steady while the purchasing power drops sharply.
Assuming the 60/40 portfolio is enough. The IMF's 2026 finding is clear: traditional stock-bond diversification provides less protection during geopolitical shocks than investors expect. Relying on it as a complete war hedge is a documented vulnerability.

Frequently Asked Questions

Is gold still a reliable hedge against war in 2026?

Yes, with one important qualification. Gold hedges against uncertainty and currency debasement, not against rising interest rates. In 2022, gold fell roughly 20% as the Fed raised rates despite the ongoing Ukraine conflict. By 2026, the World Gold Council projects gold could rise 5% to 15%, supported by geopolitical demand and expectations of rate cuts. The key is treating gold as a diversifier within a broader portfolio, not a standalone solution.

What role do Treasuries play in wartime wealth preservation?

Short-duration U.S. Treasuries provide capital preservation and liquidity when equity markets are under pressure. Long-duration Treasuries are more vulnerable when war-driven inflation keeps rates elevated. The IMF's 2026 analysis recommends prioritizing shorter maturities and higher credit quality during geopolitical stress periods.

How important is insurance for preserving wealth during war?

More important than most investors realize. Standard property and business interruption policies typically exclude war-related losses. The OECD's 2026 guidance specifically recommends auditing existing policies for war exclusions and considering political risk insurance for anyone with assets in conflict-exposed regions.

Should I sell everything and hold cash during a war?

No. History and current institutional guidance both argue against it. Fidelity, Kiplinger, and UBS all emphasize that maintaining a diversified, invested position through war-related volatility has historically outperformed panic-driven exits. Cash is a liquidity buffer, not a preservation strategy.

Can commodities outperform stocks and bonds during wartime?

Often yes, during the active conflict phase. Supply disruptions in energy and agriculture push commodity prices up sharply. The Russia-Ukraine conflict demonstrated this clearly. However, commodity prices can reverse quickly once a conflict de-escalates, making them a tactical rather than structural allocation.

Investing During War: How to Preserve Wealth When Geopolitical Risk Spikes