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Geopolitical tensions are escalating. China is threatening war – nuclear, if necessary – against countries that interfere with its claim to Taiwan. Russia is massing troops and ballistic missiles on its border with Ukraine.

Maybe it’s time to hope for the best but plan for the worst?

The Bulletin of the Atomic Scientists doesn’t allay worries about the arrival of Cold War II and heightened risk of military conflict. Last week, it again set the Doomsday Clock at 100 seconds to midnight, the closest in its 75-year history to the apocalypse scenario.

Investing during times of military brinkmanship and conflict is not discussed much in the investment community or the financial literature of recent decades. One notable exception is the 2008 book Wealth, War and Wisdom, by the late Barton Biggs.

He observed that an outbreak of hostilities can cause stock markets to sell off sharply as investors seek safety in cash or bonds. But unless there is a quick resolution, these two assets usually don’t fare too well because of the inflation generated by central banks ramping up printing presses to finance the war effort.

Staying with stocks is often the better course, according to Mr. Biggs. From 1900 to 1949, a span of time when two world wars occurred, stocks in Allied countries outperformed other asset classes, notching an average annual real return of 4.2 per cent.

Buying stocks on the “sound of cannons” can be even more lucrative. When the Second World War broke out, legendary investor Sir John Templeton bought more than a hundred cheap stocks on the New York Stock Exchange. In 1946, they were sold for an average annual real return of more than 12 per cent.

When Russia invaded Ukraine in 2014 and seized Crimea, another investing legend, Warren Buffett, remarked on CNBC that even if he knew it would lead to a major war, “I will still be buying stock.” Most investors should obtain exposure through index funds, he added.

Stocks in Germany, Italy and Japan – the major Axis countries of the Second World War – also outperformed other assets within their borders from 1900 to 1949. However, it was a case of outperforming owing to comparatively smaller negative returns. It’s not good to be an investor in most assets within a country that loses a war.

The importance of diversification is highlighted by the financial havoc borne by the defeated side. Wealth should be spread across several strong countries and currencies. It should also be diversified across assets.

In particular, acquiring farms in out-of-the-way locations is another way to preserve wealth against inflation, destruction and expropriation, claimed Mr. Biggs and others addressing the topic of crisis investing. Such properties are also good for providing an independent food source.

Additionally recommended are small amounts of precious metals, notably gold and silver coins. They are more easily concealed and can be easily carried away to provide purchasing power in the event it becomes necessary to flee chaotic situations.

Another option is shares in senior gold producers such as Barrick Gold Corp., noted Paul Tracy, editor-in-chief of InvestingAnswers.com. Barrick has gold and copper mining operations across five continents, and it pays a dividend currently yielding nearly 2 per cent.

Be careful about holding assets in digital databases. They can be ransacked or destroyed by cyberattacks, cybersecurity firms such as Chainalysis Inc. warn. On the other hand, taking responsibility for the safekeeping of one’s own financial assets requires careful planning and execution to avoid mishaps.

Take the example of Alan Turing, the math whiz who cracked German war codes and pioneered computers. He is said to have converted all of his money during the Second World War into silver bars, then burying them in Bletchley Park, near his workplace in England. At war’s end, he returned to dig up his treasure but important landmarks had been altered, and his map could not guide him to the silver.

It may be wise to plan for the worst and explore more detail than mentioned here. However, let’s not lose perspective and give up hope. Most of the time, the world navigates to the calm seas and blue skies beyond.

Larry MacDonald is a retired economist who blogs at Investing Journey (larrymacdon.substack.com).

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