Topic Intelligence: postwar

Asset managers increased cash reserves at the outset of Middle East conflict by the largest margin since COVID, signaling defensive positioning. However, emerging bullish technical signals—including Bollinger Band formations and breadth indicators—suggest market participants may be caught off guard by a sharp rally if geopolitical risk stabilizes.

High cash levels create significant dry powder for equity deployment if volatility subsides, potentially fueling a sharp rally as managers rotate out of defensive positioning. The technical setup favors momentum-driven moves higher, particularly in beaten-down growth and tech sectors. Short-covering could amplify upside.

The divergence between manager sentiment (defensive) and technical signals (bullish) reflects uncertainty about geopolitical trajectory. A resolution or de-escalation in the Middle East could trigger rapid risk-on rotation and mark a tactical inflection point for 2025 equity markets.