Equity markets are bracing for another 20-40% slump as investors turn their attention to previously overlooked risks. The shift in market focus comes after Trump’s election victory, which initially led to one-eyed positivity. However, the market is now acknowledging latent downside risks.
A valuation that was once extreme poses a significant risk of overshooting on the negative side. Markets have a tendency to hyperbole, meaning they often exaggerate both gains and losses. As such, this correction may be only getting started, indicating a potentially deeper downturn ahead.
Source: https://www.afr.com/wealth/investing/prepare-for-much-more-downside-risk-for-listed-equities-20250314-p5ljnh