Is War Negative for the Stock Market?

by Bob Stokes
Updated: March 01, 2022

Let's first state the obvious: war is tragic as it brings death and destruction.

But does war make the stock market go down?

Many observers seem to believe so. Here are some Feb. 22 headlines:

  • U.S. stocks fall sharply as Russia sends troops into breakaway Ukraine regions (Marketwatch)
  • Stocks fall as Russia, Ukraine fears intensify (Reuters)
  • The Russia Issue Is Hurting the Stock Market. (Barron's)

The "full scale" Russian invasion of Ukraine began the next evening (Feb. 23), U.S. time.

Certainly, the stock market was headed for a big fall on Thurs., Feb. 24, or so the conventional wisdom goes.

Yes, trading was highly volatile, but by the close on Feb. 24, the NASDAQ Composite was up 3.34%. And, even though the Dow had been lower by 859 points, the senior index managed to close in positive territory by 92 points.

The next day (Fri., Feb. 25), the Dow closed higher by 835 points, even as the war intensified. And, as of this writing intraday on Feb. 28, the S&P 500 went from trading in negative territory to the plus column.

This positive market action in the face of a major global conflict may seem like a head-scratcher to many observers, yet Elliott Wave International has long held that news and events -- no matter how major -- do not determine the stock market's trend.

Indeed, history shows that the stock market behaved differently during four major wars.

These charts and commentary are from Robert Prechter's landmark book, The Socionomic Theory of Finance:

Is War Good for Stocks

Figure 12 shows a time of war when stock prices (normalized for inflation) rose, then fell; Figure 13 shows a time when they fell, then rose; Figure 14 shows a time when they rose throughout; and Figure 15 shows a time when they fell throughout the hottest half (1965-1975) of a twenty-year conflict. Who wins the war doesn't seem to matter. A group of allies won World War I as stock values reached fourteen-year lows; and nearly the same group of allies won World War II as stock values neared fourteen-year highs.

Many market observers also assume that economic numbers, OPEC's actions, elections, earthquakes and many other events outside of the market cause the stock market to go up or down.

However, just like with war, the evidence shows that this is simply not the case. In other words, events --- whether positive or negative -- do not reverse the established trend that was already underway before the event.

The real driver of stock markets around the globe is the Wave Principle, which reflects the repetitive, hence, predictable patterns of investor psychology.

Get our latest Elliott wave analysis of global stock markets in the Asian-Pacific, Europe -- as well as the U.S. -- by following the link below.

As Volatility Rattles Global Markets and Investors -- You Can Be Confident

Major price swings in global stock markets will likely persist in the months ahead, consistent with the Elliott wave model.

Yet you can prepare -- ahead of time.

Our 25-plus Elliott wave experts have studied financial markets for decades, and here's what they've learned: Chart patterns repeat themselves at every degree of trend. That means you can anticipate a stock market's trends and turns.

Learn what our Elliott wave experts expect next for stock markets in the Asian-Pacific, Europe -- as well as the U.S. -- by following the link below.

Global Market Perspective


Gives you clear and actionable analysis and forecasts for the world’s major financial markets.

Get insights for the U.S., European and Asian-Pacific main stock indexes, precious metals, forex pairs, cryptos (including Bitcoin), global interest rates, energy markets, cultural trends and more.

Learn More


Forget the Fed -- Watch the Waves

The Federal Reserve, and to a lesser degree the European Central Bank, have dominated the conversation about interest rates lately. But watch our Interest Rates Pro Service analyst Ivo Zhelev apply textbook Elliott waves to forecast the price of the UK's Long Gilt -- and, by extension, UK interest rates -- without a single glance at central bank statements.

Why a U.S. Recession May Foil Economists’ Expectations

A recent survey reveals positive expectations for the economy by a group of "professional forecasters." Learn why you may not want to bet the farm on that expectation. This chart compares leading economic indicators around the time of past recessions with what's going on now.

Gold Mining Stocks Lead Gold Lower: What’s “Fundamentals” Got to Do with It?

In mid-April, gold mining stocks led by VANECK GOLD MINERS ETF turned down from one-year highs to 3-month lows in May. Gold followed, reversing from all-time highs on May 4 to multi-month lows on May 25. We don't need another "fundamental" explanation for why.