What signal is indicated by the simultaneous decline in gold and stocks? Wall Street institutions: Uncertainty peaks, rebound window quietly approaches!

The direction of the current conflict remains unclear, but a research institution says that the market is signaling that uncertainty has reached its peak.

Driven by the consequences of the Iran conflict, the market continues to experience intense volatility. U.S. stocks have fallen to new lows for the year, while concerns about inflation caused by soaring energy prices have led to continued declines in so-called safe-haven assets such as U.S. Treasuries, with yields rising sharply. Even gold has failed to provide a safe haven, with gold prices on Thursday falling to the lowest level since the sharp drop in precious metals in early February.

However, independent investment research firm Variant Perception suggests a shift in market psychology is imminent. They state: “The coming days will mark the ‘peak of uncertainty’ regarding the Iran conflict.”

In a research report sent Thursday evening, the firm believes that the recent movements in some markets have become chaotic, indicating that some traders are being forced to close positions. They point out: “A simple rule for tactical liquidation is when gold and stocks decline simultaneously, which usually signals margin calls or forced selling. We are currently in the tactical liquidation window.”

The firm adds that the sharp rise in short-term interest rates is also unnerving investors. The market has shifted from pricing in several rate cuts this year to starting to factor in the possibility of rate hikes. Recently, the Chicago Board Options Exchange Volatility Index (VIX) has traded higher than VIX futures, which also demonstrates the severity of the current de-risking actions.

All of this is happening as the Iran conflict expands and escalates. This week, oil and gas facilities in the Middle East were bombed, and Qatar has shut down most of its natural gas production, meaning the worst-case scenario has started to become reality.

The institution states: “Damage to critical energy infrastructure and the collapse in ship traffic through the Strait of Hormuz were both unimaginable three weeks ago. Now, both of these have become reality.” This development seems likely to be a defining event signaling the peak of market uncertainty in the coming days.

Deutsche Bank strategist Jim Reid provided a historical data set to explain why crisis-driven selloffs may be nearing an end.

S&P 500’s average performance after 30 major geopolitical events

Reid’s chart released on Thursday shows the S&P 500’s average performance after 30 major geopolitical events. Reid said: “In terms of timing, the average trough for the S&P 500 tends to occur about three weeks after the initial shock, and we’re approaching that window now. Looking ahead, the median return by day 34 (less than seven weeks after the event) recovers back to pre-shock levels, with the average return also nearly fully recovered by then.”