Investment Rating - The report suggests a high chance of moving towards a recession baseline forecast, indicating a bearish outlook for the market [2][16][35] Core Insights - The market has experienced a significant downgrade in growth views following recent tariff announcements, with the downgrade being historically large, equivalent to a roughly 130 basis points drop in the 1-year ahead GDP growth view for the US [5][16] - The current market pricing does not fully reflect the potential for a recession, as historical comparisons indicate that typical recessions are associated with larger equity drawdowns and more substantial declines in the Fed funds rate than currently priced [16][27] - A policy shift, particularly in trade policy, is viewed as the most direct route to market recovery, with the potential for a significant reversal in intended tariff policy being crucial for stabilization [36][37] Summary by Sections Market Reaction to Tariffs - The market price action has been dramatic, with a broad-based decline across global equities and commodities following the tariff announcements [3][4] - Financial conditions have tightened sharply, and the initial focus on US assets has shifted to a more global perspective [3][4] Growth Downgrade and Policy Reaction - The report indicates a large growth downgrade alongside a hawkish policy reaction, with the market pricing reflecting a more constrained Fed response than usual [4][9] - The implied market growth decline for April 3 and 4 represents the largest 2-day move outside significant historical events such as Black Monday and the COVID lockdown [5][9] Recession Pricing and Market Conditions - Current market conditions suggest that a full recession is not yet fully priced, with only the VIX indicating levels associated with past recession peaks, while other common recession gauges remain below those levels [28][34] - The report highlights that the risks still skew to the downside unless there is a shift in the policy path, with a high chance of further weakness in equity markets and wider credit spreads if recession pricing continues to develop [35][36]