Stock Market May Follow Cuban Missile Crisis Pattern Amid Tariff Uncertainty, Analyst Says

The stock market’s reaction to the Cuban Missile Crisis in 1962 could serve as a model for how investors respond to upcoming reciprocal tariffs from President Donald Trump, according to Tom Lee, cofounder of Fundstrat Global Advisors, Fortune reports.

Lee, known for his accurate market forecasts, believes that while investors are currently apprehensive, a significant rebound could follow if Trump adopts a flexible approach to tariffs.

Investors are bracing for a new wave of tariffs set to take effect on April 2, with fears that they could strain global economies and even trigger a recession. However, Lee told CNBC that Trump’s mention of “flexibility” in implementing these tariffs could indicate a more measured strategy, potentially easing investor concerns.

“This sounds like we could actually have a positive-case scenario with these tariffs, one that’s either mutually agreed upon or, if it’s reciprocal, maybe a good deal for businesses,” Lee explained. “And I think it would set the stage for a much bigger recovery rally than we expect.”

Lee compared the current market climate to the Cuban Missile Crisis, which nearly led to a nuclear conflict between the US and the Soviet Union. During that two-week standoff in October 1962, the stock market initially dropped but rebounded sharply before the crisis was officially resolved. The agreement between President John F. Kennedy and Soviet leader Nikita Khrushchev to withdraw nuclear missiles from Cuba and Turkey eased tensions and restored market confidence.

Lee suggested that a similar pattern could unfold today.

“The US stock market bottomed seven days into the crisis and recouped most of its losses before the actual resolution,” he noted.

Despite recession warnings from top investors like Cathie Wood, Lee remains optimistic, arguing that the market’s behavior does not align with typical recession signals. Instead, he believes investors are more uncertain than outright bearish, and a stock rally following the April 2 tariff decision could help prevent a downturn.

“One of the things we have to keep in mind is this trade deal, if it’s acceptable, could actually blunt the whole issue of trade in the future,” Lee said. “And it would actually make the US more attractive again.”

Earlier this month, Lee predicted a 10%-15% market rebound in the spring, despite fears that a trade war could stifle growth. Although stocks initially fell after his projection, they have since shown signs of recovery. The S&P 500 and Nasdaq, for example, have climbed about 3% since their March 12 lows. Additionally, markets posted their first weekly gains after four consecutive declines, aided by the Federal Reserve’s decision to keep interest rates steady.

“There are increasing signs that we’ve actually established a tradable bottom,” Lee said.