1.8 How Tariffs & Wars Affect US Stocks: Market Shocks

What a market shock is, the four moves the market makes in the first hour, how to tell whether a shock is over, and why a tariff is the one shock that pushes both doors.

  • 1.8
  • 11:46
YouTube

About this lecture

What is a market shock, and how do tariffs, wars and other surprises move US stocks? A shock has no date and no consensus, so the market prices odds instead of a number.

In this lecture, Pratham breaks down the four moves the market makes in the first hour when it cannot price a shock, and a three-step test for whether a shock is over.

You'll learn about:

  1. Why stocks fall before a war and rise when it starts: the Gulf War in 1990 and Iraq in 2003
  2. Move 1: index futures, which move first and almost round the clock
  3. Move 2: the run to safety in Treasuries, the dollar and gold, and why bonds fell in 2026
  4. Move 3: buying insurance, and why the VIX rises
  5. Move 4: market-wide circuit breakers at 7%, 13% and 20%
  6. The base rate across two dozen shocks, the ones that did not revert (the 1973 oil embargo, Kuwait in 1990), and the one-week test on oil and the 2-year yield
  7. Inflation fear against recession fear: why the Fed cut in 2020 and held in 2026
  8. Where a war, a shutdown, an election, a sanction or a court ruling lands
  9. Tariffs: a tax paid by the US importer, set by the President, that reaches stocks through both interest rates and company cash; who pays, why prices climb in steps, the dollar, and the four tariff dates

The lecture closes Module 1 with a wrap-up of the US equities crash course. Next: commodities, in Module 2.

Educational content only. Not investment advice.

MochaLearn is a free A to Z course on understanding and trading US stocks and commodities, built for Indian traders.

Key takeaways

  1. A shock has no calendar date and no consensus, so the market prices odds; stocks tend to fall before a war and rise when it starts.
  2. In the first hour the market makes four moves: index futures move first, money runs to Treasuries, the dollar and gold, insurance is bought and the VIX rises, and circuit breakers stand at 7%, 13% and 20%.
  3. Whether a shock is over: start from the base rate across past shocks, remember the ones that did not revert, then watch oil and the 2-year yield for a week.
  4. A tariff is the one shock that pushes both doors, interest rates and company cash: the importer pays, prices climb in steps so the Fed holds, and four dates matter, the announcement, the effective date, the exemptions and the court.

Quiz

  1. A war everyone expects finally starts and stocks rise. The lecture's reading?
  2. Which moves first when a shock lands outside market hours?
  3. Why is a tariff different from other shocks?