Recession looms – But “it’s always darkest before the dawn”1
Overview
After recording their worst first half in more than 50 years, US stocks fell 4.8% in the third quarter bringing the full year decline to 24.9% (see Figure 1, below) before an October rally pushed the S&P 500 up more than 5%. Equity valuations have become more attractive (see Figure 2, page 2), the Fed continues to act quickly to mitigate inflation, and following a short, possibly sharp, economic downdraft, we anticipate a return to trendline growth. This backdrop suggests stabilization followed by a choppy rebound in equity markets.
Figure 1. S&P 500 at Inflection Points – Bull and Bear Markets, 1996 to Date
