-7.4%! This decline in the U.S. stock market is worse than during previous geopolitical conflicts, and Deutsche Bank says it’s far from hitting the bottom.

According to statistics, since the close on February 27, the S&P 500 Index has cumulatively declined by 7.4%, surpassing the median level of the largest drawdowns in comparable historical events, thereby breaking the previous short-term bottoming pattern. Deutsche Bank analysis indicates that both active and systematic funds still have room for further deleveraging. Coupled with the VIX panic index breaching 30, market selling pressure has yet to fully dissipate, suggesting that the downtrend in U.S. equities is far from over.

The decline in the U.S. stock market amid the current geopolitical conflict has surpassed the median level of similar historical events, with multiple indicators suggesting that selling pressure has yet to fully subside.

On Monday (March 30), U.S. stocks briefly rebounded in early trading due to comments by Trump on negotiation progress, but the rally failed to sustain— the S&P 500 ultimately closed down 0.4% at 6343.72 points, the Nasdaq Composite Index fell 0.7% to 20794.64 points, and the Dow Jones Industrial Average edged up 49.50 points or 0.1%, closing at 45216.14 points.

Since the close on February 27, the S&P 500 has fallen 7.4% cumulatively, surpassing the median maximum drawdown of 6.1% recorded in historical geopolitical conflicts as per data compiled by Deutsche Bank.

Analysis from the Deutsche Bank strategist team indicates that active investors have significantly underweighted equities, but there remains room for further reductions; the equity exposure of systematic strategy funds has dropped below neutral levels, and if markets fail to rebound promptly or volatility continues to rise, these funds’ deleveraging actions may continue to weigh on the market.

Notably, the VIX panic index closed above 30 on Monday, a level typically indicating heightened market alertness.

Historical patterns prove ineffective this time, with deeper declines.

Approximately one month before the escalation of the Iran conflict, many professional investors bet that the impact would be short-lived, based on historical precedents—market corrections triggered by geopolitical shocks often recover within days to weeks.

A data table compiled by the Deutsche Bank strategist team once served as the market’s “operating manual.” The table showed that historically, the S&P 500 averaged 16 trading days to bottom out after geopolitical shocks, with an average recovery period of 109 days—though this figure was heavily skewed by the 1973 Arab oil embargo, during which the S&P 500 took over five and a half years to reclaim lost ground.

However, the current market dynamics have rendered the aforementioned historical patterns obsolete. Following attacks by Israel and the United States on February 28, investors were only able to trade related developments starting March 2. As of Monday, 20 trading days had passed since the onset of the conflict, and not only had the S&P 500 failed to stabilize within the historical average bottoming window, its decline had already exceeded the historical median drawdown level.

According to internal data cited by the Deutsche Bank strategist team, discretionary investors are currently significantly underweight equities but still have room for further reduction. The equity exposure of systematic strategy funds—including trend-following funds such as Commodity Trading Advisors (CTAs)—has fallen below neutral levels for the first time since July 2024.

The team warned that if the market fails to rebound in a timely manner or volatility rises further, such funds may continue to reduce their positions, exerting additional mechanical selling pressure on the market.

The VIX index closed above 30 on Monday, a level historically associated with heightened market unease, indicating that investor concerns about the future market remain at an elevated level.