At the Money: Is War Good for Markets?


At the Money: Is War Good for Markets? (February 14,  2024)

What does history tell us about how war impacts the stock market? What is the correlation between geopolitical conflict and inflation? Can these patterns inform us of future bull market behavior? In this episode, I speak with Jeffrey Hirsch about what happens to equities after global conflicts. Hirsch is editor of the Stock Trader’s Almanac & Almanac Investor Newsletter. He’s devoted much of his career to the study of historical patterns and market seasonality in conjunction with fundamental and technical analysis.

Full transcript below.


Hirsch’s WTF Forecast: Dow 38,820 (September 28, 2010)

Super Boom: Why the Dow Jones Will Hit 38,820 and How You Can Profit From It (April 12, 2011)


Jeffrey Hirsch is editor of the Stock Trader’s Almanac & Almanac Investor Newsletter.

For more info, see:

Professional website





Find all of the previous At the Money episodes here, and in the MiB feed on Apple Podcasts, YouTube, Spotify, and Bloomberg.





War in the Ukraine and the Middle East, inflation spikes in 2020 and 21,  what is the financial impact of global conflict and rising prices? 20? The answer might surprise you.  20.

I’m Barry Ritholtz, and on today’s edition of At the Money, we’re gonna discuss whether war and inflation 20 somehow adds up to higher portfolio prices. To help us unpack all of this and what it means for your investments, let’s bring in Jeff Hirsch. Not only is he the editor-in-chief of the Stock Traders’ Almanac, he is the author of the 2011 book, “Superboom. Why the Dow Jones Will Hit 38,820 and How You Can Profit From It.” Full disclosure, I was privileged to write the forward to that book, and I have been delighted to see it more or less come true.

So let’s start with your dad, Yale Hirsch, who founded the Stock Traders Almanac 60 years ago. In 1976, He predicted a 15-year super boom. [Mhmm]. A 500% move in the stock market. At the time, it wasn’t especially well received. In fact, it was fairly widely mocked.  But not only did he turn out to be right, by 2000, the move was 1000%. Explain your dad’s thinking about how war plus inflation equals a stock bull market.

Jeff Hirsch: Well, I was a wee lad back then, but I remember the T-shirts, The Dow 3420 T-shirts. I still have a box of mediums in the house, but my kids can wear it, but not me. So coming off the, you know, generational low in 1974, um, that everyone knows, which

Barry Ritholtz: ’73-74 bear market was as vicious as the financial crisis.

Jeff Hirsch: Yeah. As ’07-08. As vicious. And perhaps more so because it was a little bit fresher. It was it was a little bit

Barry Ritholtz: It was also in the middle of a long bear market as opposed to coming off of market highs.

Jeff Hirsch: True. We had been coming down for a few years. [Since ‘66].  A student of the 4-year cycle, uh, 4-year presidential election cycle and the decennial patterns and having, you know, written the almanac for several years And be just being an avid researcher. He’s discovered that after war and, you know, we’re in the Vietnam War. We were, we just came out. We had the April 75 coming out of, you know, Saigon that horrific, you know, seemed to helicopters over the embassy.  And we had, you know, the oil embargo, uh, which you and I probably both remember the odds and even days. And what he observed was that after these previous big, international conflagrations wars, World War 1 and World War 2. But after this this war period, there was inflation stimulated by government spending.

Barry Ritholtz: More than a rally. That’s a full-blown bull market, 500 percent.

Jeff Hirsch: Secular bull market.

Barry Ritholtz: So I’m I’m glad you used that term to different then a shorter term cyclical market within a longer term, secular. So what were the numbers like after World War 1 and after World War 2?

Jeff Hirsch: The numbers, it was about just around 500 percent, 517%, 521%, right in the just over 500%. For both following both wars. Following both wars. Unbeknownst to him, after the Vietnam War and the inflation 20 that came from, you know, that [Oil embargo] and all the rest. And all the rest.

It ended up being the better part of 1500 or 2000 percent going all the way up To to the top in either 98 or or 2000 if you wanna measure it there. Right. His forecast, his prediction was for Dow 3420 by 1990.

Barry Ritholtz: That was 500% percent from the market low,

Jeff Hirsch: From the intraday low of the Dow on December 6th, if memory serves, uh, 1974.  And the Dow didn’t actually hit that number until, uh, it was July of 1992, but the S&P had the 500 percent move-in. It was May of 19 And that’s really the more important index than July 1990. It did in 1990. So, you know, I remember when you and I were, You know, talking about the forward, and I had showed you the old, you know, newsletters that he put up. It’s called smart money back then.

And in January 77, he put out a special report called “Invitation to a Super Boom” which took all of the research that had been done and the articles that were written through at 76 and put it together a little package to, You know, give to subscribers and to promote what he was talking about there. Um, and we put those pictures in there. You know, he’s got some hand-drawn lines on the old, you know, overhead projector, you know, transparency.  And then, you know, as we were going through the financial crisis, 0 7, 0 8. Also looking back to the 2002 9/11 situation and then going into Afghanistan and all that stuff.

Looking at that, we were tracking this, You know, long secular bear market pattern. And, um, you know, after the bottom in o9, you know, we’re looking at things in early 2010 are saying this is setting up again.

Barry Ritholtz: Coming out of the financial crisis,  a 56% peak to trough sell off.  You’re looking at what just took place. We’ve been in Afghanistan really soon after 9/11, it’s almost a a decade. And then around the same time, we’ve been in, Iraq for about 7 years. We had a bout of inflation in ‘07-08-09. What are you thinking when you look out over the next 15 years from the perspective of 2010-11?

Jeff Hirsch: We weren’t looking out initially 15 years; what we were witnessing and what we were observing was a similar chart pattern. It was it was chart pattern recognition. Looking at the image that, you know, you’ve seen in the book of Yale’s chart and seeing the same thing.

Barry Ritholtz: That’s a hundred-year chart that shows you war, inflation, and several 500 percent gains.

Jeff Hirsch: I think Josh called it, you know, the greatest chart, you know, he’s ever seen or ever. It was something like on Earth or something like that at 1 point.

But it’s a log scale, so you can see, you know, the moves relative of the different time frames. But looking at that, you could see it’s setting up again coming Off the ‘09 bottom. We just, you know, crunched numbers, did research, went back and, you know, read all the old stuff that he wrote, Went through the old almanacs, and we’re like, this is happening again.

Barry Ritholtz: So let’s let’s take this apart and see if we can rationalize why this might happen.

In the past, governments have talked about the peace dividend when the Berlin Wall came down as an example, the shift of government spending from the military and the Pentagon to civilian usage. Is that part of the thinking behind this?

Jeff Hirsch: It does play a part, you know, in there, but the spending from the war – and I think this time around, the COVID spending, is similar. It’s government spending period. It just puts a lot of money into the economy, enables a lot of development.

Barry Ritholtz: You’re totally anticipating my next question, which is how parallel is the the war on COVID, the pandemic, lockdown, pent-up demand, terrible sentiment, CARES Act 1 was 10% of GDP. We’ve spent – depending on whose numbers you rely on – 4, 5, 6 trillion dollars. [Insane]. And then we have a giant 9, 10 percent spike in inflation.

COVID + inflation: How parallel is this to what we saw following World War 1, World War 2, and Iraq and Afghanistan?

Jeff Hirsch: I think it’s incredibly parallel. Um, 1 of the things that the current Cycle didn’t have from the previous cycles was the inflation. We had very low inflation spike a little bit during the financial crisis. Very

Barry Ritholtz: Remember, oil ran up to $150 a barrel and meat and milk got crazy expensive.

Jeff Hirsch: But it didn’t come through to the, you know, the regular CPI, you know, Minus food and energy.

Barry Ritholtz: Because housing appeared to be disastrous. So that was why – by the way, there’s a crazy thing about owner’s equivalent rent that when real estate prices go up, depending on the circumstances, sometimes OER goes down dramatically,  especially when rates are low and they’ll give anybody a mortgage. So CPI

Jeff Hirsch: Which happened back in COVID. Right. Who didn’t refinance? The US government. Right. All the rest of us did.

Barry Ritholtz: That exactly right. So how much of this is sort of like a wartime, you know, there was rationing, there’s supply chain issues, there’s a ton of pent-up demand and a lot of negative sentiment. And then when the dam breaks, it seems like everybody goes crazy.

Jeff Hirsch: It’s so parallel to me. I could not have imagined COVID back in 2010 when I first made this forecast.  We were thinking only, you know, large military involvement overseas. It’s gonna take a lot of spending, and it’s and, you know, when that’s over, we’ll get that relief rally.

The other thing that I add to the equation that, you know, I my father didn’t articulate us clearly, but having, you know, the benefit of hindsight standing on his shoulders. You know, the equation, the war plus inflation equals super boom or bull market as you, you know, you you’ve put it is Technology, and something I the phrase that I came up with “Culturally Enabling Paradigm Shifting Technology.”  You know, all the global keep going. So it’s not biotechnology, energy, what whatever.

[And Now AI]. Now AI. And exactly. It’s not just 1 thing. It’s a it’s a cocktail of different technologies that drive productivity And the next boom the next boom and new developments, and I think that’s where we’re at right now.

Barry Ritholtz: I’m so glad you said that. Whenever I try and explain to people the difference between a secular expansion, a secular bull market, and a cyclical I always go back to your dad’s post-World War 2 chart. And I like to tell people: You know, when World War 2 ended, 42 million GIs returned home. They have the GI Bill that puts them through college. [That’s where he got his degree in the GI Bill].

You have the expansion of suburbia, the rise of the automobile culture. The interstate highway system. Interstate highway system, the rise of civilian air travel, the rise of the electronic industry, which we don’t think about anymore. But appliances, the conveniences All those things. Refrigerators, television, radio, dishwashers, plus the baby boom on top of it. What a great time to be an investor.

Today, sentiment is very negative. Social media is a cancer about it. Social media is a cancer on us.  And the regular media does a terrible job covering the economy.

Jeff Hirsch: They’re trying to compete with social to get eyeballs.

Barry Ritholtz: And the question I always like to ask people whenever we see political polling is, who the hell is answering the landline at home except for cranky old grandpa who just watched Fox News and has yelled at the kids to get off. Who am I voting for? They all suck. Goodbye. Like, I hate that sort of stuff, but it leads to a fascinating question, which is people might be unhappy, but you have a massive technological boom, a ton of fiscal spending, and an enormous amount of corporate productivity and very low debt.  Might we be looking at another super boom?

Jeff Hirsch: We’re in it.

Barry Ritholtz: We’re in it? We’re already in it. [Right] What inning is this?

Jeff Hirsch: There was this secular bear market ahead of the oil embargo.

Barry Ritholtz: I use 66-82 is my phrase is my range. Some people look at 68. But it’s, like, 15 plus or minus years. Which is interesting.

Jeff Hirsch: The ultimate low was 74. But everyone says that ‘09 was the beginning of the of the second half. Not. Absolutely not. I think 2016 was. That little bear market.

Barry Ritholtz: 2013, we set a new high in the S&P going back to ’01. That’s the start of the new bull market for me.

Jeff Hirsch: Or somewhere in the 13 to 16 period where we had that little tiny, uh, bear mini bear market from 15 to February 20 16.

Barry Ritholtz: Barely down 18, 19 percent. Q4 2018, 19.9%. [Either way]. Uh, it’s just a normal pullback. The 20 percent number is meaningless. 1. I’m still in the UK. You think we’re like, fifth inning, sixth inning?.

Jeff Hirsch: Maybe even a little bit further up there. I think by the time we get into 25, 26, we could start looking at, you know, another stock picker sideways trading market for for many years to come or at least, you know, a handful. The thing with these cycles, you know, people have what you said 66 to 82. People wanna look at this 18-year cycle, a 17-and-a-half-year cycle.

It’s more and the thing that we pointed out on this chart is that it’s impacted by events. Like, the bull market after World War 2 was short. It was it was 8 years, the roaring twenties. Okay? Then you had, you know, [Correction: World War 1]

Thank you. World War 1. And then the depression and the whole secular bear market before, you know, World War 2 was 25 years.

Okay. So these things aren’t necessarily the same time frame. We could have a secular bear market, you know, after this we get them to the super boom level or a little bit past it, You know, for it could be a few years. It could be 5, 6, 7, 8. It could be, you know, 15, 20.

We have to see what I think it’ll be on the short end of things. I think all these cycles have compressed with the productivity, and we’re gonna get more compression with AI and all the technology. So I don’t think it’s gonna be a super long depression, despite some of the real, you know, Pollyanna’s out there.

Barry Ritholtz: So to wrap up, There’s an incalculable and terrible cost of war in lost lives and physical and emotional injuries. Global conflicts and war just exert a horrific cost on society.

Analysts who’ve studied this have found that the joys of peace when war ends go beyond the relief of ending human suffering; peace often leads to strong economic growth and large subsequent gains in stock markets.

I’m Barry Ritholtz and you’ve been listening to Bloomberg’s At the Money.




Print Friendly, PDF & Email

Posted Under