A villainous media tycoon in a James Bond movie said “Bad news is good news”.
Take that and keep that burning in your investment landscape. Especially, during market downturns. And, that is when investments turn to gold. Don’t believe it? Look into every historical event of big market corrections during geopolitical crisis.
Let me elucidate with examples:
1. Gulf War – Jan 1990 – Sensex rises from 1,200 in July 1991 to 4000 in April 1992
2. 9/11 – September 2001 – Tested Lows below Sensex 2,600 and rose to 5,800 in 2003
3. COVID -19 – March 2020 – Rose from lows below Sensex 26,000 and moved above 61,000 in Sept 2021
4. And, then there was the Lehmann Brothers/Global financial crises in 2008. Although this cannot be classified as geopolitical slowdown, but rather an economic slowdown, it can be used as a perfect case of why in the aftermath of a global crisis, markets bounce back – Markets dropped to lows below Sensex 7,700 only to bounce back to an all time high of 20,500 by the end of 2010.
So why do crisis so often trigger some of the most powerful rallies in market history?
At face value, it should be counterintuitive. Wars, pandemics, and financial meltdowns should logically send markets into long-term decline — yet time and again, they spark the opposite.
The reason lies in what follows the chaos. These events typically force policymakers to act swiftly and decisively. Central banks slash interest rates to near-zero levels, pumping liquidity into the system.
Governments unleash large-scale fiscal stimulus to support businesses, jobs, and demand. Crises also tend to clear political gridlock, paving the way for long-overdue economic reforms that unlock new growth potential.
Once rates are lowered, fixed-income returns diminish, especially after adjusting for inflation. With safe assets offering negative or negligible real yields, investors shift toward equities — not just for growth, but to preserve purchasing power. That rotation into risk assets becomes the fuel for the next bull run.
Add to this the proposition that in the aftermath of a crisis, economic data often benefits from the low base effect — growth metrics like GDP appear sharply higher simply because they’re rebounding from a severely depressed level. This optical boost in numbers fuels bullish sentiment, reinforcing the market’s recovery narrative and driving stocks even higher.
Together, these factors form a powerful cocktail that reignites investor confidence — and lays the groundwork for a market rebound.
Now let’s connect the dots with each example above again.
(1) Gulf War (1990–91) – The Fed cut rates from 7.00% to 4.75%. In India, the crisis led to a balance of payments crunch, triggering the landmark 1991 economic reforms.
(2) 9/11 Attacks (2001) – U.S. rates dropped from 3.50% to 1.75%, with a $91 billion stimulus. India also eased policy to support growth amid global uncertainty.
(3) Global Financial Crisis (2008) – India slashed rates from 9.00% to 4.75% and rolled out ₹1.86 lakh crore in stimulus (~3.5% of GDP).
(4) COVID-19 (2020) – Repo rate cut from 5.15% to 4.00%, with a massive ₹20.97 lakh crore package (~10% of GDP) and liquidity support to drive recovery.
Several sectors tend to outperform following geopolitical crises. Oil and gas benefit from elevated crude prices due to supply disruptions. Lower interest rates boost interest-sensitive sectors like real estate, auto, and broader consumer discretionary plays. The defence sector gains as governments ramp up military spending in response to heightened tensions.
Additionally, select financials, particularly banks and NBFCs, benefit from post-crisis monetary easing — lower rates and increased liquidity improve lending conditions and credit growth. These dynamics make certain sectors attractive bets during the recovery phase, as capital flows back into the market in search of stability and growth.
So be brave, go out there during difficult times and conquer a whole new world for your investments. Because, this is the only time you can time the markets. Bad news indeed is good news!