MARKET CALL: The War Is Getting Foggier

Why has the stock market held up so well since the start of the war? The S&P 500 is down only 4.96% from its record high on January 27 and 3.59% since the start of the war on February 28 (chart). It fell to its 200-day moving average on Friday and held it. The obvious explanation is that the market is discounting a short war. That was our initial assessment, but three days after the war began, we concluded it might last longer, leading to a 10%-15% correction, and warned that we could not rule out a bear market.

That's what happened in 2022 after Russia invaded Ukraine, sending oil, gas, and grain prices soaring. Back then, we bet on the economy's resilience and called the October bottom of the S&P 500 in early November. That all worked out well. The bear market was attributable to widespread fears of a recession, which we did not share.