Inside Markets — Retest Phase

Slowing growth data and resilient labor should be enough to keep the SPX on track to retest the lows. The bottom end of the 4/9 bullish reversal at ~4950 should qualify as a retest in the early weeks of the 90-day reciprocal tariff pause. Unfortunately, that level is only a ~20% peak-to-trough decline, which falls short of the average recession-driven peak-to-trough decline of ~33%. Labor market data that signals an impending recession will likely result in a lower low in the ~4100-4500 range.

Looking at recent history, the pullback in global sentiment and capex in 1018-19 on trade-related uncertainty  generated a peak-to-trough decline of ~20% without a material slowing the in employment or slide into recession.