Greetings from Copenhagen.

Trump has now officially “confirmed” the narrow scope of tariffs set to arrive next Wednesday, and so far that has allowed markets to shake off some of the recession fears that have weighed on U.S. equities in recent weeks—despite the Philly Fed services index printing weak today, which is not a good sign for ISM Services if previous correlations hold.

We’ve previously shared scenario analyses showing what typically happens after a 10% correction in the S&P 500—conditional on whether a recession follows. For now, markets appear to have decided on the non-recessionary path, with current price action closely resembling what we saw in 2024. If prior growth shocks are any guide, we may be nearing a firm bottom in U.S. equities—provided the economy avoids an outright recession.

If tariffs are not implemented at the scale previously feared, we could be setting up for a September-style U-turn in equities and growth. Markets have already priced in the worst-case economic fallout from the Trump administration’s policy mix, so a more benign outcome could fuel a reversal.

Chart 1a: Are We Past the Bottom in Equities?