Spring Chill Bites! Global Stock Markets Experience Panic March - When Will the Rebound Come?

Capital markets are still experiencing intense volatility in the aftermath of Middle East conflicts. Global stock markets have declined for the third consecutive week, posting their worst performance in nearly a year. European and American markets have each hit new lows for the year, while soaring energy prices have sparked inflation concerns, leading to sell-offs in traditional safe-haven assets like U.S. Treasuries and causing yields to rise sharply. Even gold failed to provide shelter, with prices briefly falling below $4,500 on Friday evening. Investors are waiting for signs of a bottom, wondering when the turbulence might end.

Three Weeks to Bottom?

History shows that markets often bottom about three weeks after a crisis erupts. Deutsche Bank strategist Jim Reid reviewed historical data in a report sent to First Financial and suggested that the sell-off triggered by this crisis may be nearing its end.

Reid presented the average performance of the S&P 500 after 30 major geopolitical events. “In terms of timing, the S&P 500’s lowest point tends to occur about three weeks after the initial shock, and we are approaching that window,” he said. When looking at the largest subsequent drawdowns in past events, the median decline was around -6%, with an average of about -8%.

“From a longer-term perspective, the median recovery to pre-shock levels occurs around day 34 (less than seven weeks after the event), and the average return is close to full recovery,” Reid added.

Independent research firm Variant Perception shares a similar view, believing market sentiment is about to shift, with the next few days marking the peak of uncertainty in the U.S.-Iran conflict.

Recent market trading has become chaotic, signaling forced liquidations by some traders. “A simple tactical liquidation rule is: when gold and stocks fall together sharply, it usually indicates margin calls or forced liquidations are happening,” the firm said. “We are in a phase of tactical liquidations. Investors are also panicking due to a sharp rise in short-term interest rates — markets have shifted from betting on multiple rate cuts this year to pricing in rate hikes. The recent high VIX index relative to VIX futures also reflects intense risk-off behavior.”

All of this coincides with the escalation and spread of the U.S.-Iran conflict. This week, Middle Eastern oil and gas facilities were bombed, and Qatar significantly curtailed natural gas production, suggesting the worst-case scenario is becoming reality. “Critical energy infrastructure has been hit hard, and shipping through the Strait of Hormuz has plummeted — events unimaginable just three weeks ago. Now, they are real,” the firm said. These developments are likely to be key events signaling a peak in market uncertainty in the coming days.

Another 5% Drop Max?

For investors, future oil prices will significantly influence the stabilization of risk assets.

Michael Hartnett, chief strategist at Bank of America, said the market has not fully capitulated but is approaching that point. When 88% of global stock indices fall below their 50-day and 200-day moving averages simultaneously, it signals a prime opportunity to increase risk exposure.

The S&P 500 has already hit that level, but global markets need to fall another 3% to 5% to trigger this major buying opportunity.

Another buy signal could be when cash holdings in investment portfolios rise to 5%. A March survey of fund managers by Bank of America showed cash levels increased from a low of 3.2% in 2026 to 4.2%, so reaching 5% is not far off. Rising oil prices are also causing ongoing losses in the market — affected by the U.S.-Iran conflict and attacks on Middle Eastern energy facilities, Brent crude futures have gained two-thirds this year.

Hartnett believes that the upcoming midterm elections in November could prompt President Trump to seek a quick de-escalation. This is a key basis for Bank of America’s core investment advice: short the dollar when the dollar index is above 100; go long when the 30-year U.S. Treasury yield hits 5%; and go long if the S&P 500 drops below 6,600. However, if the conflict ends and Trump’s approval ratings do not recover, U.S. stocks may struggle to reach new highs this summer.

The accelerated market correction this month actually began last October, when the Fed started cutting rates while stocks were at high levels. Hartnett said, “The end of a sharp correction often coincides with oversold conditions in leading sectors.” This phenomenon is happening with Bitcoin, software sectors, and the “Seven Giants” of U.S. stocks. Previously overbought gold, precious metals, semiconductors, and emerging markets have also experienced painful capitulation selling. Hartnett’s team believes that once markets are convinced that oil prices will permanently fall below $100, investors will be much safer to re-enter risk assets.

He also outlined three core investment themes for the next five years: 1. The commodities bull market is expanding from gold to metals, energy, and strategic resources like chips, rare earths, minerals, and oil, with countries controlling these resources gaining an advantage. 2. Investors will favor international stocks and U.S. mid-cap stocks over highly leveraged large-cap U.S. stocks. 3. Consider allocating to contrarian consumer stocks, which may benefit from policies aimed at low-income voters.

(Source: First Financial)