Russia's invasion of Ukraine didn't surprise US intelligence, which has been warning for months about Vladimir Putin's intentions. It did surprise investors, though.
"You have the panic button being hit right now, I don't think the market was pricing in the risk of a proper military conflict," said Emmanuel Cau of Barclays in the wake of Russia's invasion. Indeed.
For some time, strategists have been (correctly) pointing out that most geopolitical events only have a fleeting effect on markets. Major corporations, too, had been calm, even uninterested. During earnings season, only 4 per cent of S&P 500 companies mentioned Ukraine on their earnings calls; 72 per cent mentioned inflation.
Russia's actions certainly dominated market headlines last week, although even then many argued that investors were more worried by other issues. Why would US carmakers and homebuilders be in bear markets "if the stock market angst is all about Putin", asked market strategist David Rosenberg.
Meanwhile, Schwab’s Jeffrey Kleintop was unmoved by the Russian threat just two days before Thursday’s full-scale invasion, saying market and economic trends were “unlikely to be significantly altered”.
Perhaps investors and commentators underestimated the Russian threat because they overestimated Putin, seeing him as a brutal but ultimately rational actor – not someone who would commit such a reckless act of economic self-sabotage.
Putin’s rationality has clearly been overstated – something that should concern investors and non-investors alike.