Events are jarring, but going to cash depends on time horizon. Valuations could fall further as earnings estimates are too high. Volatility is a feature of markets; we've been complacent in low-volatility uptrends. This shouldn't knock people off long-term strategic allocations.

The dip hasn't been deep (only -3.5% as of Friday). Testing the 200-day MA would only be -6% from highs, a function of markets being sideways for 5 months. We measure technicals (flush deck) to spot fear spikes, which are opportunities to allocate bravely for improved forward returns, even if not the ultimate low.

We haven't seen a broad fear spike yet. Markets still trade at 20x forward earnings with 14% growth estimates for 2026/2027—a high bar. The correction process is probably just getting started, as there have been no EPS estimate cuts. GDP is expected at 2.5%, but if oil remains elevated, that growth is unlikely.

Private credit has two risks: headline (liquidity/outflows) and underlying portfolio risk. Concerns are now morphing from headline to underlying portfolios—loans to highly levered companies at tight spreads—suggesting a shift to a broader, true risk-off environment.

Individual fear leads to bad decisions. Aggregate fear measures like VIX and put/call ratio are illuminating. VIX spiking suggests fear is percolating. Retail is NOT walking away; Citadel data shows record inflows into US equities in Jan/Feb, suggesting complacency with record-high allocations.

Oil can move off highs with de-escalation, but a return to pre-conflict lows is unlikely due to infrastructure damage. A higher geopolitical risk premium will be kept in oil markets.

Everybody has been banking on that episodic pattern. It remains to be seen if we can count on that kind of upside.