Currently the main market driven theme and the high risk event is the geopolitical event happening right now in Ukraine. As we have seen the market has become very sensitive to any risk event The news coming out from Ukraine are escalating very fast the Risk ON-OFF play and usually in time of uncertainties Risk On-Off will play in both sides as things begin to escalate in Ukraine risk aversion will kick in and when things will see some improvements the market will react as well, Risk-ON.

Next I'm going to speak about how stock market react during times of war, and the following paragraph is just a small from my article which can be found here: Ukraine a Geopolitical Event. Cycles of War.

  • War Bullish or Bearish
History is the answer to our question, and the history of the stock market suggest that there are no empirical evidence to show that war creates a major decline in the stock market thus the idea that Wars are being bearish for the market is wrong. Lets take for example the 1991 Gulf War and the Market reaction at that time (see Figure 1). The assumption that people will sell stock during wars and buy government bonds as a safe haven, is flawed. And especially during this days when confidence in government is collapsing, corporate bonds are more attractive than government bonds.


  • Figure 2. DJIA 1991 daily chart. Stock Market reaction to gulf War.
This doesn't mean that War is bullish for the market either, actually statistically speaking during the initial stage of war the market doesn't perform that well. During the World War I capital flow into US but unfortunately the exchange was closed shortly after the beginning of World War I. In Figure 2 we can have a look in much more detailed picture between Wars and the Stock market correlation, there is mixed results but we can say that war doesn't creates any major decline in the stock market.
  • Figure 2. War and Stock Market Correlation.

Best Regards
Daytrader21
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