What will happen in Europe and will there be a recession in the US? With the S&P500 down 6.7%year-to-date, these two big questions remain, and we continue to believe both will weigh on themarket multiple. Why? The bear case has a much higher probability than the bull case, in ourjudgment. Does it matter? Well, the thing is, the investment implications for the US equityportfolio manager are the same whether there is a 40% chance it’s a recession and a 50%chance it’s a slow and choppy recovery, or a 50% chance it’s a recession and 40% slow andchoppy. There’s a 90% chance that it’s not good, and the exact constitution of that outcome mightnot matter so much for investment implications.
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