The S&P 500 is currently down about 20% from its peak amid unprecedented market events. The impact of tariffs and panic selling has caused significant drops, similar to historical market crashes, leading many to lose faith in the market. The economist suggests that while it's tempting to panic-sell, a long-term strategy of holding and gradually investing remains essential despite short-term fluctuations.

Current market conditions indicate extreme valuation levels for the S&P 500, with high P ratios signaling potential stagnation in growth. Market predictions have been significantly revised downward, with a long-term intrinsic value target set at 3,000 points, indicating room for decline. The likelihood of a recession appears imminent, placing downward pressure on earnings and stock prices.

The S&P 500 has seen its ninth worst week since WWII, raising fears of an impending recession as hedge funds offload stock holdings. An increasing spread between 2-year and 10-year bonds signals recession risks. The market's volatility and historical patterns suggest a cautious approach is needed as analysts predict further declines.