At the index level, the five-week selloff in US equities is the furthest thing from dramatic.

After a month of war, the S&P’s not even in a technical correction, to say nothing of a bear market.

Compared to Donald Trump’s “greatest” selloffs, the current pullback doesn’t even merit mention. “Liberation Day” was -21%, the original pandemic rout -35% and the late-2018 mini-bear -20%. (That latter episode was a preview of Trumpian absurdities to come. During 2018’s shortened Christmas Eve session, Trump made a bad situation immeasurably worse by wondering, on social media, whether Jerome Powell was capable of making a two-foot putt. Quaint as this sounds in 2026, that counted as an egregious affront to Fed independence “way” back then.)

The simple figure below gives you some context for the current “drawdown.” With the caveat that markets are clearly running out of patience with the war, the index-level slide on the S&P’s wholly pedestrian.

But as one commenter pointed out late Friday, describing the pullback as pedestrian misses nuance. Under the surface there’s a lot of pain, and the war constitutes psychological insult to injury at a time when the market’s still very anxious about private credit and the trajectory of the US labor market.

On March 25, and then again on March 26, Trump said publicly he thought the main equity benchmarks would be lower by now (and oil even higher) considering how much chaos he unleashed in the Mideast. (Only Trump would muse aloud about such a thing).

That suggested neither his stock nor oil price pain thresholds are breached. But that could change next week if there’s no indication that peace negotiations are progressing.

At some point in the days ahead, markets will want confirmation from the Iranian side that talks are in fact underway. Ideally, Trump’s envoys, as well as Bagher Ghalibaf and Abbas Araghchi, will take Pakistan up on its offer to serve as a forum for in-person peace discussions.

If there’s no concrete evidence that the conflict’s moving towards a resolution, you could see a pick up in mechanical selling.

The red annotation in the figure above shows realized vol drifting up as the 10-day and one-month windows are all “war sessions.”

Admittedly, the upturn’s not much to look at just yet. But it does matter. When realized vol moves up, it triggers mechanical de-leveraging.

While the sell-flow isn’t destabilizing, it isn’t entirely trivial either. “US Equities Index is now seeing previously chill realized vol beginning to get ‘dragged-up,'” Nomura’s Charlie McElligott said, editorializing around the figures below, which give you a sense of the magnitude(s).

On Nomura’s estimates, vol control cohorts shed more than $52 billion in equity exposure over the past month. Nearly $34 billion of that came over “this past one week alone,” McElligott remarked.

The good news is, the month and, more importantly, the quarter, are almost over. That means new risk budgets. And on the rates side, my sense is that it’d take another big leg higher in crude (think: a sustained re-test of the Ukraine highs and beyond) to get another blast of hawkish front-end rates repricing considering how far those trades have already overshot.

The main risk is that the war drags on and as a consequence, realized vol resets higher across assets for a prolonged period. In that scenario, the tape would be fighting persistent de-leveraging flows from slower-moving investor cohorts. And that’s where the big AUM is. See “VaR Is Hell.”

“For longer-horizon vol scalers, the implication from the realized vol ‘catch up’ is [a] more pervasive and persistently bearish flow going forward,” McElligott went on. “These positions are being mechanically reduced. Every. Damn. Day.”

Finally — and this is a geopolitical addendum that’ll be irrelevant if, Inshallah, we do get a peace deal — I wouldn’t have been so quick to insert myself into the middle of this if I were Pakistan. I fear Islamabad’s reading too much into the White House’s affinity for Asim Munir, Trump’s “favorite field marshal” and the de facto dictator of Pakistan’s garrison state.

In addition to pleasing Trump, Islamabad as two main incentives to see the conflict resolved: Averting a(nother) failed state on its border and preventing a scenario where a newly-inaugurated mutual defense treaty with Saudi Arabia becomes an existential liability. Those are (very) powerful incentives, and I can certainly sympathize with Pakistan’s decision to prioritize them.

However, Trump’s unreliable. If he invades Iran — or even “just” seizes Kharg Island — it’s going to look, in Tehran, like Islamabad was in on a conspiracy. Like Pakistan lulled Iran into peace talks even as Trump moved thousands of Marines into position. I’ll leave that there hoping, as noted, that it’ll be irrelevant.