Is the Market Oversold? Yes. Is the Bottom In? Likely Not.

Uncertainty over economic and earnings outlook has deepened

Highlights

• Uncertainty over economic and earnings outlook has deepened

• Wall Street is slicing GDP growth estimates to levels coincidental with recessions

• Widening credit spreads mean that the worst is probably not over

• But for those with a 12-month horizon and tolerance for volatility, initial buy signals are emerging

Key Takeaways

• Markets Lean into Recession Call: The bog of uncertainty over the economic and earnings outlook, riddled with downside risks and the only question is magnitude, pushed the Nasdaq Composite into official bear market territory, now down nearly -23% off its December peak. Another index is in bear market terrain as well — the Russell 2000, which is now off -25.2% from the highs. Ominously, and perhaps the most vivid sign of how the stock market has begun to lean into the recession view, the Dow Transports are also off by a huge -26% from the recent highs (to levels we last saw in October 2022 when it looked like a recession was coming — to only be saved by the AI wave!).