00:00The S&P 500 has wiped out nearly $5 trillion in value since tensions between the U.S. and Iran
00:06escalated. And more importantly, it briefly broke below its 200-day moving average,
00:11one of the most important support levels in the market. Now, historically, when the market breaks
00:15this level, it doesn't usually stop there. We saw it in 2020 when stocks went on to fall more than
00:2125%. Again, in 2022, another 20% decline followed. And even more recently, in 2025,
00:27the market continued lower by around 15%. But this time, something looks a bit different.
00:33The market rebounded almost immediately after the U.S. and Iran agreed to a temporary ceasefire.
00:39So the question now is whether this is the start of a real recovery or just another temporary bounce
00:44before history repeats. There's a reason that the 200-day moving average is this important. It's
00:49one of the most widely watched levels in the market, followed by both retail and institutional
00:54investors. And in many cases, even algorithms use it for investment decisions. So when the market
00:59breaks below it, it can trigger a broad wave of selling pressures as investors and systems react
01:04at the same time, pushing the market even lower. And in a way, this level reflects how the market is
01:09interpreting the current risks in catalysts. And the main catalyst right now is the disruption in key
01:15commodities, especially oil. Because even after the ceasefire announcement, oil prices are still
01:20roughly 70% higher than they were before the conflict began. And historically, shocks like
01:25this tend to ripple through the economy, pushing up transportation and production costs, and
01:29eventually showing up in inflation. The problem is, inflation sits at the center of the entire
01:34financial system. And it plays a major role in how risk assets like stocks actually perform.
01:40Historically, a sustained inflation rate rise above 3.5% has almost always been the catalyst
01:46that ultimately pushed markets lower. We saw that in 2000, again in 2008, and more recently in 2022.
01:53The reason is actually quite simple. When inflation rises, it starts to squeeze both sides of the
01:58economy. Consumers lose purchasing power, so they begin to cut back on spending. At the same time,
02:03companies face higher costs from wages, energy, and raw materials. That combination is what puts
02:09pressure on corporate earnings. And that matters because over time, stock prices tend to track earnings.
02:15Over the past few years, earnings expectations have surged, becoming a key driver behind the current
02:20bull market. So if that growth starts to slow under inflation pressure, the market could come under
02:26pressure as well. However, there's an important nuance here. If we look closer, we can see that
02:31earnings are actually more of a lagging indicator. In fact, in 2020, and again in 2022, stocks actually
02:37bottomed as earnings were just starting to fall. And if we look at this through the lens of past wars,
02:42the pattern isn't always what you'd expect. Looking back across conflicts, since World War II,
02:48markets typically did sell off first, as uncertainty spikes. But over the next 6 to 12 months,
02:54they tend to recover and move higher. On average, returns have been around 10 to 11% in the year
02:59following the onset of these events. And that might sound counterintuitive, especially given the real
03:04economic damage that wars can cause. But this is exactly where the idea that the stock market is
03:10forward-looking comes in. Markets don't wait for the data to improve. They move ahead of it. In many
03:15cases, by the time the news feels the worst, a lot of that risk is already priced in. And that's
03:20often
03:21when markets start to turn. It's the same idea behind what Warren Buffett once said, be fearful when
03:26others are greedy, and greedy when others are fearful. So now what matters more is whether the
03:31current drop in market is already pricing in those real risks, or at fearful state, or there are still room
03:37to the downside. One way to measure this is by looking at something called the VIX index. It tracks
03:42volatility in the S&P 500, and in simple terms, it's often seen as a measure of market fear. When
03:47the VIX rises, it usually means investors are getting more nervous. And if we overlay it with
03:52the stock market, we can see that major market bottoms, or what you could call peak fear, have
03:57often happened when the VIX spikes above 40. We saw that in 1998, 2003, 2009, 2020, and more recently
04:05in March 2025, when tariff fears peaked and the market eventually recovered. Now compare that to
04:10today. The VIX is sitting at around 20, which suggests we may not have reached that same level
04:15of extreme fear just yet. And there could still be room for the market to price in more risk,
04:20especially if the ceasefire doesn't hold. But that doesn't automatically mean the market has to go
04:25lower from here. If tensions fully ease and commodity prices stabilize, then markets could recover from
04:30here without VIX entering 40. But it certainly is useful to monitor in order to understand the
04:36current market sentiment. And in an environment full of headlines and noise, that kind of signal
04:40matters. It helps us stay grounded and focus on data rather than emotion. But as we know,
04:46even data might fail sometimes, and past performance doesn't guarantee future results.
04:51At Capital.com, we'll continue tracking market sentiment, inflation, and the technical signals
04:56shaping financial markets in 2026. Hit like and subscribe to stay tuned. Thanks for watching.
Comments