Sibylle Greindl
12 May 2026
Why do stock markets thrive when the world is in crisis?
A war blocks one of the world's key oil routes. The IMF warns of a global slowdown. Yet equity markets are trading near all-time highs. Here is why.
In trading rooms, the mood is tense. The Strait of Hormuz is closed. A fifth of the world's oil and gas supply is blocked. The International Monetary Fund forecasts a slowdown in global growth, renewed inflation, and a higher probability of recession. Economists are debating. Headlines are multiplying.
Yet major equity markets in the United States, Japan, and Europe are trading close to their all-time highs.
What is happening, and how do we explain this disconnect?
Why do markets rise despite a war?
The answer lies in a fundamental distinction: financial markets do not measure the state of the world. They anticipate the future profits of companies.
Markets price in real time what they expect over the next twelve to twenty-four months. Robert Shiller, 2013 Nobel laureate in economics, showed that asset prices reflect collective beliefs about the future far more than any mechanical reading of the present. His data, going back to 1871, confirms that markets incorporate long economic cycles that extend well beyond the day's news.
The economy, by contrast, measures what has already happened: growth figures are published months after the fact, and a recession is only officially confirmed after two consecutive quarters of contraction.
By the time a recession shows up in the statistics, markets have often already hit their lowest point.
Are markets and the real economy disconnected?
Yes, to the extent that listed markets do not represent the economy as a whole. Corentin Scavée, co-founder of Easyvest, puts it this way: "Economic growth and political events do not necessarily feed through into financial markets. You can have a chaotic economic or political environment while financial value is being created on the markets at the same time."
Markets aggregate expectations about the largest, most profitable, most internationally diversified companies. This selective slice of the economy is structurally more resilient: large global companies generate on average close to 40% of their revenues outside their home country, making them partly independent of domestic slowdowns.
Economic crises also hit sectors very unevenly. Today, retailers, whose customers are most sensitive to inflation, are posting significant declines. Large technology companies, buoyed by enthusiasm around artificial intelligence, continue to advance and are lifting global markets.
The disconnect works in the other direction, too. China offers the most documented example: for thirty years, its economy grew at nearly 9% per year, without stock market investors benefiting. The main Hong Kong index stagnated for two decades despite GDP growing twenty-fold. The profits of listed companies, their governance, and the structure of the market mattered far more than the vitality of the national economy.
Financial markets and the real economy are not two readings of the same phenomenon: they measure different things, over different time horizons.
Do geopolitical crises cause lasting falls in markets?
History gives a clear answer: no. Over several decades, major geopolitical crises have invariably produced the same market pattern: an initial fall, driven by uncertainty, followed by a recovery as soon as the worst-case scenario appears less likely.
After the 11 September 2001 attacks, US equity markets had recovered to their pre-crisis level within 31 trading days. After the Brexit vote in June 2016, the recovery took 19 days. After Russia's invasion of Ukraine in February 2022, initial losses had been erased in under a month. The 2020 health crisis was the most spectacular test: a fall of more than 30% in a few weeks, followed by a full recovery in 104 trading days.
Trading days to recover pre-crisis levels. Chart showing the number of trading days needed to recover pre-crisis levels after four major geopolitical shocks.
The mechanism is always the same. Faced with a shock, investors rapidly price in the most pessimistic scenario. As soon as that scenario starts to look less probable, prices recover, often sharply. Deutsche Bank analysts have called this the "geopolitical playbook": after every major shock, markets fall, then rebound.
Those who sold during these episodes missed the recovery. Those who held their positions, or increased their exposure during the downturn, have been rewarded every time.
What should individual investors do during a market crisis?
The most useful answer is often the hardest to hear: never make a rushed decision under the influence of emotion. Selling to cut losses, or waiting for better days before investing, means betting on your ability to predict what markets have often already priced in. The rebound frequently arrives before the news even improves.
Investors who understand this mechanism make a shift in perspective: they come to see geopolitical dips as opportunities to buy at a lower price, a strategy known as "buying the dip".
The rise of individual investors managing their portfolios from their phones has accelerated this shift. In April 2025, during the "Liberation Day" announcement, the S&P 500 fell sharply. Individual investors rushed in and bought $3 billion worth of shares near the low. In the months that followed, the S&P 500 staged a spectacular recovery, one that, according to Reuters, was also fuelled by those same individual investors.
No one knows when buying whether they are at the absolute low, or whether markets will fall further. The value of buying the dip lies in committing to hold the position over the very long term, to benefit from the eventual market recovery, whether it comes sooner or later.
Why the long-term horizon changes everything for investors
Crises generate noise. A portfolio exposed to thousands of companies across around forty countries is built to filter out that noise and keep working, regardless of the day's headlines. No single geography, no single sector concentrates all the risk. At Easyvest, this principle guides every portfolio: broad diversification, low costs, and a committed long-term horizon via ETFs.
In trading rooms, the analysts watching the Strait of Hormuz hour by hour and those holding their long-term positions are not looking at the same horizon. The first is watching for the next headline. The second is thinking about where they will be in ten years.
For individual investors, the real question is not what oil will do tomorrow, but which direction they choose to look.
The Easyvest simulator shows what a twenty or thirty-year horizon could mean for your portfolio, based on your situation and objectives.
Sources: Joe Rennison, "The Wartime Rally, The New York Times (2025)· Markets thrive on contradictions", The Economist (2025) · Robert Shiller, Irrational Exuberance, Princeton University Press (2000, rev. 2015) · Robert Shiller, historical stock market data, Yale University (2024)· Corentin Scavée, co-founder of Easyvest