Stock markets bottom in the early stages of military conflict, says Tom Lee. Here's what the strategist expects now.

By Jules Rimmer

Historical precedent suggests risk assets trough not long after wars start

While the duration of the war is unknown, Lee acknowledges, he senses Trump wants a quick end

Stock markets bottom at the beginning and not end of wars is the reassuring message that Fundstrat's Tom Lee sent to investors in a note coinciding with the first quarter's final trading session.

While the war's duration is unknown, Lee looks at seven major conflicts dating back to 1900 and finds equity markets have a habit of troughing early on because investors "price adverse risks early and quickly."

Markets usually bottom early during wars

He notes that historically, markets bottom within the first 10% of a war's duration.

Comments posted Tuesday by President Trump on his Truth Social network were interpreted by financial markets as a de-escalation signal and the alacrity with which stock markets responded serves as a "reminder of the drastically cautious positioning of markets," Lee said.

The co-founder and head of research at Fundstrat believes that many of the more pessimistic forecasts for the S&P 500 SPX are wide of the mark: "As we look ahead to the month of April, our view is that we are closer to the bottom than those with dire forecasts."

Lee points to the views of Fundstrat's head of technical strategy Mark Newton, who thinks a range between 6200 and 6300 - the S&P 500 on Tuesday jumped 2.9% to 6,528 - would represent the index low and then provides some further insights of his own to discourage bearish sentiment.

Lee writes that "historically, steep declines are followed by V-shaped recoveries," as he thinks the U.S economy is equipped to deal with $100 oil.

Lee's optimism is predicated on the notion that the U.S. is a beneficiary of higher oil prices,-as a net exporter, but even in that instance, $100 West Texas Intermediate grade oil (CL00) is still below the average of this millennium, when adjusted for inflation. According to Lee, the highest nominal price for oil was $144, clocked in the summer of 2008, but with inflation 53% higher since, WTI would need to trade around $220 to $240 to match that record in real terms.

OIL: $100 oil today is far less than it has been

Moreover, Lee adds that higher defense spending on the war is adding $20 billion to $30 billion to GDP monthly, offsetting the impact of higher oil prices.

The equity put-call ratio (a technical sentiment indicator) has a reading of 0.9, the same as that seen during the April 2025 lows after the announcement of the Trump administration's new tariff policy.

In Lee's mind, "we are 90-95% through this decline."

-Jules Rimmer

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04-01-26 0428ET