Fundstrat’s head of research Tom Lee on Monday said the stock market has already absorbed most of the downside from the ongoing war, estimating that 90% to 95% of the sell-off is likely complete.
Speaking on CNBC, Lee said historical patterns suggest markets tend to adjust early in conflict cycles, even when geopolitical uncertainty remains unresolved. He noted that in past wars, equities typically bottom within the first phase of the conflict, often well before its conclusion.
Lee added that despite continued volatility, the current risk-reward setup for equities has improved as markets price in prolonged uncertainty.
Historical Patterns Suggest Early Market Bottoms
Lee said analysis of past major war events shows markets usually reach their lows early relative to the total duration of the conflict.
He pointed to examples such as World War II, where equities bottomed within months despite the war lasting several years. Based on that pattern, he said recent market weakness likely reflects a large portion of the adjustment to geopolitical risk.
This suggests that further downside may be limited unless conditions deteriorate significantly beyond current expectations.
Markets Remain Sensitive To War Developments
Lee said the trajectory of the war remains the dominant driver of markets, outweighing central bank policy in the near term.
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He described the market as “spring-loaded,” meaning that any clear resolution or de-escalation could trigger a sharp upward move in equities.
At the same time, he noted that investors remain cautious, with many waiting for concrete developments before repositioning risk.
Inflation And Policy Risks Still In Focus
Lee acknowledged ongoing concerns around inflation, particularly in the context of rising energy prices and continued geopolitical tensions.
However, he said current price pressures appear more consistent with a temporary shock rather than a sustained inflation cycle. He added that maintaining credibility in monetary policy remains critical to anchoring inflation expectations.
Lee also pointed to strong employment data and increased wartime spending as factors supporting economic resilience, suggesting that recession risks may be less severe than feared.
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