| March 31 classification | Final major negative technical flow of Q1 |
| Driver | Equity drift → forced fixed income reallocation |
| Options OI roll-off | ~35% of all US options exposure cleared |
| Rates impact | Pensions = structural bond buyers |
| April outlook | Pension headwind NOW CLEARED ✓ |
With this event complete, one key mechanical headwind lifts into April. If geopolitical risk eases, the setup for re-risking is structurally better than it was last week.
| Faster CTA models | Already leaning net short equities |
| Slower trend-following models | Near neutral — deteriorating |
| BofA est. selling (down scenario) | Up to −$73 billion |
| 200-DMA CTA trigger (S&P) | ~6,622 — breached |
| Vol-targeting model exposure cut | >20% reduction |
| Russell 2000 CTA signal | Sell-signal triggered |
| Upside flip trigger | S&P reclaim of 200-DMA → buyers |
With ceasefire diplomacy dominating the tape, history offers a clear framework. Across 7 major US conflicts since WWI, markets delivered positive 12-month returns after resolution in 6 of 7 cases. The Gulf War (1991) — swift military action, oil shock, decisive end — is the closest analog to the current Iran situation.
| Conflict | Ended | 6M Return | 1Y Return | 2Y Return | Key Driver |
|---|---|---|---|---|---|
| World War I DJIA | Nov 1918 | +18% | +30.5% | +25% | US creditor nation · Roaring 20s onset |
| World War II DJIA | Aug 1945 | −4% | −8.1% | +20% | Wartime→peacetime reconversion disruption |
| Korean War DJIA | Jul 1953 | +20% | +44% | +28% | Post-WWII boom · GI Bill consumer demand |
| Vietnam War S&P 500 | Jan 1973 | −10% | −14.7% | −40% | Arab oil embargo Oct '73 — not the war itself |
| Gulf War ★ Closest Analog | Feb 1991 | +14% | +29.1% | +11% | Swift decisive victory · oil shock resolved rapidly |
| Iraq War S&P 500 | Dec 2011 | +10% | +28.4% | +35% | QE tailwind · post-GFC recovery acceleration |
| Afghanistan S&P 500 | Aug 2021 | +12% | +26.4% | −18% | 2Y distorted by 2022 rate-hike bear market |
★ Gulf War highlighted as most analogous to current Iran conflict. 6M and 2Y returns are approximate estimates; 1Y figures sourced from verified historical data. DJIA used pre-1957; S&P 500 thereafter. Past performance does not guarantee future results. For internal informational use only.
Average across positive-resolution conflicts. Key variable: speed of Hormuz normalization. Swift reopening → relief rally; cyclicals & growth over defensives.
Strongest signal in the dataset. Three most relevant analogs: Korea, Gulf War, Iraq. Risk: Goldman warns −5–7% more if Hormuz stays closed through summer.
Vietnam proves war's end ≠ recovery. The 2Y outcome will be determined by inflation, not ceasefire. Embedded energy costs could keep the Fed constrained into 2027.
Markets are pricing the war's ending, not the war itself. Pension mechanics have cleared. CTA positioning creates asymmetric upside once the S&P reclaims its 200-DMA. History is unambiguous — six of seven post-war resolutions delivered strong 12-month returns. The Gulf War analog points to a front-loaded recovery once ceasefire certainty arrives. The question for clients is not whether to be invested, but how to position across the 6M–2Y horizon as the geopolitical fog lifts.