Our glass is typically half full. Lately, the contents have been evaporating. What would fill it again? Either a substantial market decline lowering valuations, or a sudden reduction in core inflation levels along with a commensurate decline in interest rates. Neither are likely to occur in the short term. Though valuations have compressed from their highs, further deterioration is expected as the economic backdrop worsens.

Most believe we are destined for a recession, if not already in one. Between the negative sentiment and the stock price valuation reset that needed to take place, it’s not surprising that the markets have meaningfully softened. While the economy is clearly slowing, we do not foresee an imminent recession.