Bull trend in place, though repair process will take time

Key takeaways

• Global risk assets are under pressure.
• Our head of U.S. economics’ base case remains that the economy is cooling but not moving into a recession near term.
• The past few days have felt a bit panicky, and our view is the market was caught offsides, leading to an unwind of trades. We are encouraged that a lot of the froth of the market is being wrung out and fear is returning.
• From a technical perspective, for the S&P 500, our view is the near-term downside from today’s low is likely limited to about 4-5%.
• If past is prologue, following past volatility shocks, investors should be prepared for wide swings in both directions.
• It’s too early to say the low is in. There has been damage done, and the repair process will likely take time. However, the risk/reward appears to be gradually improving as the market’s bar for positive surprises resets lower.