The S&P 500 Index's "wartime mode": rises at the beginning of the week, then consolidates, with declines on Thursday and Friday.

A Middle East war that has been going on for five weeks and has been shaking the global economy has gradually formed a predictable pattern in the U.S. stock market: a strong open at the beginning of the week, a period of sideways, choppy trading in the middle of the week, and then—almost every Thursday and Friday—declines as if it were “scheduled.”

Similar price action has also shown up to varying degrees in European equities, emerging markets, and even parts of the U.S. Treasury market, but it has been especially pronounced in the S&P 500 index. Since the outbreak of the Iran war, the index has gained over its first three trading days of each week, only to plunge by roughly 9% in total across Thursday and Friday.

Optimism was especially evident at the start of this week, with the S&P 500 up more than 3%, as investors believed Trump intended to help the U.S. extricate itself from the Iran conflict.

Analysts say the logic behind this is simple: the weekend means two days; Friday is even off-limits due to the holiday, sometimes even leaving three days with no trading. And during this time, the war situation could undergo major changes—especially given that U.S. President Trump tends to take significant actions while markets are closed. These changes could further rattle the global economy. As a result, many investors choose to cut stock exposure before the weekend.

Joe Gilbert, portfolio manager at Integrity Asset Management, said: “Entering the trading black-out period amid unpredictable risks is unsettling. Compared with holding positions, it has become easier to reduce risk before the weekend.”

However, this intraday/within-week trading pattern formed during wartime also serves as a warning to investors who believe the selloff is over:

After the rebound at the start of this week, some are saying a market bottom has formed. “Big Bull” Tom Lee said U.S. stocks often bottom in the early stages of a war, and that this round of pullback is near the end. The S&P 500 typically bottoms in the first 10% of the duration of a war; inflation-adjusted oil prices have been below the average for this century, so the impact on the U.S. economy is limited; combined with today’s extremely cautious market positioning, the current adjustment is already 90% to 95% complete.

Steve Sosnick, chief strategist at Interactive Brokers, said that as the week progresses, optimism is usually replaced by a risk-avoidance mindset.

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