In a CNBC interview Tom Lee said: 1. Stock market usually bottoms 10% into a war. World War 2 was 5 years, the market bottomed 5 months into the war 2. Now, the risk reward is good for stocks. https://t.co/8akx9uRxUm
A chart plotting S&P 500 peak-to-trough drawdowns and the number of calendar days to recover for significant military conflicts; it shows the average drawdown (~7%) and average recovery (~55 days), illustrating that market bottoms around wars are often modest and occur early—supporting the tweet’s claim that markets can bottom quickly into conflicts and that the risk/reward can become attractive.
Source: LPL Research (republished on Investing.com)
Research Brief
What our analysis found
In a widely circulated CNBC interview from February 22, 2022, Fundstrat Global Advisors' Tom Lee argued that the Russia–Ukraine sell-off represented a compelling buying opportunity, claiming that stock markets usually bottom about 10% into a war and that during World War II — a conflict lasting five years — the market bottomed just five months after U.S. entry. Lee's thesis rested on a pattern he called "buy the invasion," drawn from examining equity performance around conflicts including Vietnam, the Gulf War, Afghanistan, Iraq, and Crimea.
Historical data partially supports the WWII claim but with a notable discrepancy: the Dow Jones Industrial Average hit its major wartime trough in March–April 1942, roughly three to four months after the U.S. declared war on December 8, 1941 — not the five months Lee cited. Meanwhile, broader research from LPL Financial covering 23 to 25 geopolitical crises since WWII found that the average total drawdown was only about -4.7%, with markets bottoming in an average of 19 days and recovering within approximately 42 days — figures that diverge significantly from Lee's "10% into a war" framework.
The IMF's April 2025 Global Financial Stability Report adds further nuance, finding that sovereign risk premiums typically widen by about 30 basis points in advanced economies and 45 basis points in emerging markets following geopolitical shocks, while stock valuations decline by roughly 2.5% when a major trading partner is involved in a military conflict. Academic literature on the Geopolitical Risk (GPR) index similarly shows that effects vary widely by country, conflict type, and whether the event triggers a recession or supply disruption — undermining any single universal rule about wartime market bottoms.
Fact Check
Evidence from both sides
Supporting Evidence
Fundstrat's multi-conflict analysis
Tom Lee and Fundstrat examined equity behavior around several modern conflicts — Vietnam, the Gulf War, Afghanistan, Iraq, and Crimea — and found that markets tended to bottom near or shortly after the invasion date, supporting a "buy the invasion" pattern (reported by INO.com and other outlets quoting Fundstrat research).
WWII market trough occurred early in the war
Historical Dow Jones data confirms that the major World War II-era market low occurred in early 1942, only months after U.S. entry in December 1941, broadly consistent with Lee's point that the market bottomed well before the five-year conflict ended (Macrotrends historical chart data).
Independent analysts echoed the pattern
Grayscale and other market commentators independently reused Fundstrat's data to illustrate that prior invasions were followed by equity recoveries, with charts showing bottoms forming close to invasion dates, reinforcing the empirical basis of Lee's argument for several historical episodes (reported by Protos).
Contradicting Evidence
LPL Research data shows smaller and faster drawdowns
An analysis of 23 to 25 geopolitical crises since WWII by LPL Financial found an average total drawdown of only about -4.7%, an average time to bottom of roughly 19 days, and an average recovery period of approximately 42 days — substantially milder than Lee's suggested 10% decline rule, and LPL explicitly cautioned that outcomes worsen when conflict coincides with recession (Breakwater Wealth Management summary of LPL data).
The WWII timing claim is slightly off
While Lee stated the market bottomed five months into the war, the Dow's major cyclical low occurred in March–April 1942, roughly three to four months after the December 8, 1941 declaration of war — a minor but meaningful factual discrepancy (Macrotrends historical Dow Jones chart).
IMF research shows heterogeneous, not uniform, effects
The IMF's April 2025 Global Financial Stability Report found that geopolitical shocks produce varied impacts depending on trade and financial linkages, with developed markets suffering smaller valuation hits than emerging markets and average stock declines of about 2.5% when a main trading partner is involved — evidence against a simple universal bottoming rule (ProShare summary of IMF report).
Academic literature emphasizes context-dependence
Research using the Caldara and Iacoviello Geopolitical Risk index finds that geopolitical shocks raise volatility and lower returns on average, but the magnitude differs significantly by country, conflict type, and whether the event triggers broader recession or supply disruptions, making broad generalizations like "markets bottom 10% into a war" an oversimplification.
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