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Josh Jamner of ClearBridge Investments noted that tariffs would drive inflation higher while acting as a drag on economic growth—an unfavorable mix for risk assets. Investors have responded by pulling capital from equities, leading to two straight sessions of heavy selling. The S&P 500 is now hovering near its 200-day moving average, a key technical level that could offer temporary support.
Investors Await Further Signals Amid Recession Fears
Despite the pre-market bounce, Michael Brush from MarketWatch warns that more selling could follow, citing several key risks. First, further economic data, such as Friday’s employment report, could reinforce recession fears. Second, investor sentiment, while bearish, has not reached extreme levels typically associated with market bottoms.
Additionally, financial conditions continue to deteriorate, signaling that the market downturn may not be fully priced in. Bloomberg’s Financial Conditions Index has been weakening all year, a trend that previously led to a 10% S&P 500 correction in 2023. The decline in discretionary stocks relative to staples also suggests weakening consumer confidence, a historical precursor to further market losses.
Temporary Bounce or Selling Opportunity?
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