Russia’s invasion of Ukraine could keep stocks sliding for weeks before the market finally hits bottom

U.S. stocks staged an impressive reversal on Feb. 24 — including a 950-point intraday move to the upside for the Dow Jones Industrial Average DJIA, +2.51% — but there’s too much eagerness to declare that the U.S. market has bottomed.

Market bottoms more typically are made when despondent investors throw in the towel. Yet the narrative being used to support the “bottom is in” belief in the Russia-Ukraine conflict is that stocks spring back quickly from geopolitical crises. As MarketWatch reported earlier this week: “Despite near-term volatility in the wake of geopolitical events over the past three decades, ranging from terrorist attacks to the start of wars, stocks have tended to bounce back relatively quickly, … rallying 4.6% on average in the six months following such crises dating back to 1990 and rising 81% of the time.”

Or consider this tweet a money manager sent out after the news broke that Russia had invaded Ukraine: “Excellent buying opportunities never feel good at the time.” After presenting one of the many lists of past geopolitical events that are circulating around Wall Street, the tweet continued: “Lesson? Buy when there’s blood in the streets.”

These narratives gloss over the extent of the short-term losses that geopolitical events inflict on investors. The attitude adopted by the market’s cheerleaders is like telling a boxer to celebrate being knocked down because it creates the opportunity to get up again. Another problem with these rosy pictures is that they subjectively use past geopolitical crises to prove their point. A far different conclusion emerges if we focus on a specific subset of global crises relative to this latest one: war.

The chart below highlights six major geopolitical events since 1941 that involved military invasions and/or threats to national sovereignty. The chart plots the S&P 500’s SPX, +2.24% performance over the six months following the conclusion of those crises. In three of these six instances, U.S. stocks had yet to recover.

Full story here- https://www.marketwatch.com/story/russias-invasion-of-ukraine-could-keep-stocks-sliding-for-weeks-before-the-market-hits-bottom-11645781162?mod=home-page