The US-Israel-Iran war breaks the "historical script"; Deutsche Bank: US stock market deviates from past patterns, CTA funds may continue to reduce holdings

Odaily Finance has learned that, against the backdrop of the ongoing escalation of the US-Israel-Iran war, global markets are gradually deviating from the "historical script." A month ago, at the outbreak of the war, many institutional investors generally expected this geopolitical event to end swiftly and bet that the stock market would recover in the short term.

This judgment was mainly based on historical experience. Statistics from Deutsche Bank's strategy team show that, in past geopolitical shocks, the S&P 500 Index typically took about 16 trading days to bottom out and then completed a recovery in around 109 days. However, this average is significantly influenced by the extreme case following the 1973 Arab oil embargo, when the S&P 500 took more than five and a half years to fully recover its losses.

So far, market trends have started to diverge from this pattern. Last Friday marked the 20th trading day since the outbreak of the conflict. Since the market close on February 27, the S&P 500 index has dropped about 7.4%, already exceeding the historical average decline of 6.1% seen after previous geopolitical conflicts, indicating a more profound impact this time.

Although there was a "buy the dip" rebound in early Monday trading after US President Trump released signals of negotiation progress, the rally failed to sustain, indicating that investor confidence remains fragile.

From a liquidity perspective, institutional investors have clearly reduced their risk exposure. According to Deutsche Bank, active investors currently hold underweight positions in stocks, but there is still room for further reduction. Meanwhile, systematic strategy funds, including CTAs, have lowered their stock allocations to under neutral levels for the first time since July. If there is no rebound or if volatility rises further, such funds may continue to cut positions.

Market sentiment indicators also reflect rising anxiety. The S&P 500 Volatility Index (commonly known as the "fear index" VIX) closed above 30 on Monday, a level that is usually seen as a sign the market is on high alert.

As for index performance, on Monday, the S&P 500 index fell by 0.39% (UTC+8), the Nasdaq dropped by 0.73% (UTC+8), while the Dow Jones saw a modest increase of 0.11% (UTC+8).