Deutsche Bank: a 4% drop in the S&P 500 is a historic signal, indicating that the bottom is near after geopolitical shocks.

Deutsche Bank recently released a research report pointing out that with the ongoing deterioration of the situation in Iran, global stock markets are entering the most serious phase of geopolitical-driven selling in history. The bank stated that since the end of February when the US launched joint airstrikes against Iran and triggered a series of retaliatory actions, the S&P 500 index has fallen by nearly 4% in just 13 trading days. By reviewing over 30 major geopolitical crises since 1939, Deutsche Bank found that US stocks typically hit a temporary bottom around 15 trading days after the outbreak of a conflict, with an average decline slightly above 4%. This means that the current market adjustment in terms of magnitude and pace is highly consistent with historical patterns, and the S&P 500 index is entering a typical "bottoming window" driven by geopolitical risks. Although short-term data indicate that the bottom is near, the market still needs to be vigilant against potential unexpected pullbacks. Deutsche Bank analysts emphasized that although the average decline is around 4%, the median from historical data shows that the largest pullbacks triggered by geopolitical events often fluctuate between 6% to 8%. In extreme scenarios, if the conflict further escalates leading to a complete disruption of the supply chain, the decline may exceed the average expectations. The current market is in a highly sensitive period, where historical patterns provide psychological support on one hand, while the unpredictability of geopolitical risks still hangs like a sword of Damocles over the stock market. The bank pointed out that this "average trajectory calculated daily" differs from the typical maximum pullbacks that occur in such events. On a daily calendar basis, the bottom usually appears around three weeks after the initial impact, indicating that the market is approaching a crucial turning point. Historically, recoveries typically occur within a few weeks, with returns returning to pre-impact levels around the 34th day on average. Meanwhile, the latest escalation in the Middle East situation has heightened uncertainty. The energy markets have reacted strongly, with reports of a major liquefied natural gas facility in Qatar suffering severe damage, leading to spikes in natural gas and oil prices. Deutsche Bank stated that the key question facing investors is whether the deteriorating background signals a deeper, more enduring sell-off, or if the market is following familiar geopolitical patterns. The chart released by Deutsche Bank is as follows: