WEEKLY BRIEF | Another War, Another Market Test

Hello, and welcome to the IVA Weekly Brief for Wednesday, March 4.

There are no changes recommended for any of our Portfolios.

Another geopolitical shock. Another test for investors.

As of Saturday, the U.S. is at war, joining Israel in attacking Iran. The conflict has widened since. I’ll leave the geopolitical analysis to others, but let’s look at this through an investor’s lens.

First, based on Monday’s trading, you wouldn’t necessarily know war had broken out.

Yes, Energy ETF (VDE) gained 2.1%—no surprise when missiles are flying in the Middle East and the Strait of Hormuz, through which much of the Middle East’s oil travels, is effectively shut down. But 500 Index (VFIAX) was flat on the day, and SmallCap Index (VSMAX) gained 0.5%. Hardly the stuff of panic.

Tuesday told a different story.

As the conflict escalated, volatility spiked and losses were widespread, though calmer heads ruled by the time markets closed. The S&P 500 index, which was down as much as 2.5% midday, ended with a 0.9% loss. Among Vanguard’s major index funds:

• 500 Index -0.9%
• SmallCap Index -1.7%
• Developed Markets Index (VTMGX) -3.7%
• Emerging Markets Index (VEMAX) -3.3%

Even Energy ETF slid 0.9%, despite crude oil prices rising 4.0%.

Gold—often viewed as the ultimate safe haven—fell 4.5% on Tuesday. And while Total Treasury ETF (VTG) was also in the red, down 0.1%, it still provided relative stability compared to stocks and gold.

What does this all mean for long-term investors?

First, as I told Premium Members on Monday, wars—while tragic—have not typically been a reason to abandon stocks.

My research finds that over the past 125 years, the Dow Jones Industrial Average (the Dow) rose 7% on average in the six months following the onset of hostilities and went on to gain 11% over the full year. That’s double the index's average annual return of about 5% since 1900%. (These figures do not count dividends.)

Premium Members can read my deep dive into the stock market’s performance during armed conflict over the past 125 years—including a close look at the World Wars—here.

The bottom line: Staying invested is never easy. Wars are a pretty compelling reason, you’d think, to sell stocks. But patience and discipline have been rewarded time and again in the markets.

Second, keep wearing your media-distortion glasses.

On Tuesday morning, the Wall Street Journal’s webpage greeted readers with a headline of “Dow Sinks More Than 1,000 Points.”

Yikes. That sounds dramatic!

But context matters. It was less than a month ago that the media was celebrating the Dow crossing 50,000. At that level, a move of just 2%—up or down—equals 1,000 points. In other words, a Dow point isn’t worth what it used to be

“Dow sinks 1,000 points” grabs attention. “Dow slips 2%” doesn’t.

Of course, the Journal is going with the drama—it’s in the business of generating clicks, not cultivating long-term investment discipline. Our job as investors is to see through the framing and focus on what actually matters. (And, as always, I’m here to help.)

Whether it’s war, a global virus, or something else, what matters most hasn’t changed: stay diversified and stay invested.

Supplemental Distributions Ahead

Mutual fund investors typically think of capital gains distribution season as a December event. That’s mostly true. But, as I told Premium Members on Monday, some Vanguard funds also make “supplemental” distributions in March.

These supplemental distributions represent gains or income earned in the prior year that weren’t included in the fund’s December 2025 distribution. (It’s an accounting thing.) By regulation, they must be paid out before the end of the first quarter.

Though the firm’s 2026 tax calendar still doesn’t show it, Vanguard has confirmed that it will publish a list of affected funds on March 9.

I will share another update in next week’s Weekly Brief. Stay tuned.

Vanguard Settles Texas Lawsuit

As I told Premium Members on Monday, Vanguard settled with Texas—and several other states—over allegations the fund giant used its ownership stakes to pressure coal producers to reduce output.

Under the agreement, Vanguard will pay $29.5 million and agreed it will not:

• Direct a company’s business strategy
• Threaten to divest (sell its holdings) unless a company takes certain actions
• Nominate directors or submit shareholder proposals

Vanguard also reaffirmed its commitment to expanding its Investor Choice proxy voting program.

In my view, this is a relative win for Vanguard. The fund giant has essentially agreed to do what it already does. More importantly, it removed a legal cloud over its core business—running index funds—and set the definition of what it means to be a “passive investor” on its own terms.

This isn’t really about coal or ESG investing. It’s about protecting Vanguard’s index fund franchise—and that’s exactly what this settlement does.

Our Portfolios

Our Portfolios are showing positive returns for the year through Tuesday. The Aggressive Portfolio is up 2.4%, the Aggressive ETF Portfolio is up 2.1%, the Growth Portfolio is up 1.7%, the Moderate Portfolio is up 3.3% and the Conservative Portfolio is up 2.1%.

This compares to a 0.1% gain for Total Stock Market Index (VTSAX), a 5.8% return for Total International Stock Index (VTIAX), and a 1.3% gain for Total Bond Market Index (VBTLX). Vanguard’s most aggressive multi-index fund, Target Retirement 2070 (VSNVX), is up 2.4% for the year, and its most conservative, LifeStrategy Income (VASIX), is up 1.5%.

IVA Research

Yesterday, in preparation for Vanguard’s planned launch of Developed Markets ex-U.S. Growth Index ETF and Developed Markets ex-U.S. Value Index ETF (scheduled for March 23), I examined whether growth or value makes sense overseas—and whether index or actively managed funds are the better vehicle. See here.

Until my next IVA Weekly Brief, have a safe, sound and prosperous investment future.