U.S. stocks staged an impressive reversal on Feb. 24. 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. Market bottoms more typically are made when despondent investors throw in the towel.

Despite near-term volatility in the wake of geopolitical events over the past three decades, stocks have tended to bounce back relatively quickly. Stocks have rallied 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.

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 crises to prove their point.

The chart below highlights six major geopolitical events since 1941 that involved military invasions and/or threats to national sovereignty. The average across all six of the crises in the chart is 60 trading days — about three months. In no past crisis did the market bottom on the day of the invasion or attack.
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