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1. Are markets out of the woods after the recent wild ride?

Even with the 90-day pause, US effective tariff rate is still expected to be much higher than pre Liberation Day.

The whole of 2018-19 trade war saw the effective tariff rate increase of only 1.5%, vs current 15x that amount.

2. “Recession is at best half way priced.” Says JPMorgan.

“We note that in the past 5 downturns, S&P500 on average fell 37% peak to trough. Last 3 times, starting forward P/E was 19x, and trough P/E 12x.

So far, from the February market peak to last Friday close, S&P500 is down 13%, and currently trades on 19x P/E.

“These are valuation levels seen at the start of a downturn, rather than at the end.”

Also, the S&P500 is down only 5% since pre-Liberation Day levels, and most major markets are only down single digits on the year, which is far from capitulation, or overdiscounting the potential weakness.

3. Goldman lifts gold outlook to $4,000 for mid-2026 as risks rise.

“We incorporate stronger-than-expected central-bank demand and the boost from increased recession risk to ETF inflows in our forecasting framework,” analysts including Lina Thomas wrote in a note.

Central banks are now seen buying 80 tons a month, up from an earlier assumption of 70 tons a month.

The recent stress in the bond market and gold’s rally show that the metal is “uniquely positioned to hedge recession risk.”

4. Concentration risk is still very elevated.

The weight of the largest 10 stocks in the S&P500 (black on left scale) is still almost 38%, and it could lead to a further unwinding of past leadership.

5. But it’s not all doom and gloom, especially for Europe.

Domestically-exposed stocks are likely to stay in favor, especially with the stronger currency and stimulus coming from Germany.

A basket of these stocks — composed mostly of utilities, real estate, telecoms and financials — has been outperforming this year.

“Europe in dollars is now outperforming relative to S&P 500 since Liberation Day and I will expect this to continue as the market seeks domestically EU-exposed pockets that are unaffected by a slowdown in global growth,” says Goldman Sachs trading specialist Rich Privorotsky.

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