War Won't Interrupt the Long Bull, Short Bear Trend of US Stocks

Give yourself and everyone a psychological massage:

Based on US stock data from 1940-2026, US stock performance after major geopolitical shock events:

1 month: Average -0.9%, Median -0.2%, Probability of gains 46%
3 months: Average +0.8%, Median +2.7%, Probability of gains 66%
6 months: Average +3.4%, Median +5.3%, Probability of gains 61%
1 year: Average +3.0%, Median +7.4%, Probability of gains 65%

The comparison reveals that geopolitical risks (wars/assassinations/terrorist attacks/conflicts escalation) such as the Cuban Missile Crisis/1967 Third Middle East War/2003 Iraq War/Russia-Ukraine conflict, will not fundamentally change the bear market trend in stocks. Only "financial systemic risks" can cause prolonged bear markets in US stocks.

For example (with 1973 Fourth Middle East War as the precursor): the 1973 oil embargo/2008 financial crisis both saw US stock declines exceeding 30%.

After the 9/11 attacks, US stocks pulled back 18%, but most believe this was primarily influenced by the aftermath of the 2000 internet bubble burst. The post-9/11 reconstruction work actually benefited economic development.

Additionally, note that this table only includes various geopolitical conflict events, excluding other impacts (such as the COVID-19 pandemic). The table only shows price changes at expiration, without considering maximum drawdowns during the period. For example, the 2007/2008 financial crisis shows a 41% decline one year later in the chart, but the actual maximum drawdown for the S&P 500 was 46% and for the Nasdaq 45%.

Therefore, a roughly 10% pullback in US stocks around this year's midterm elections would be about right. As for deeper declines, none are visible at the moment.