Equity markets seesawed on Tuesday as investors and traders brace for what could be a very bad Retail Sales figure. That figure is due out today and could show that retail sales are down -1.0% or more compared to last year. This is big news for the market because it means price hikes no longer offset a decline in volume that began early in 2022. In this light, the recession has begun, and it will most likely get worse before it gets better.

The takeaway is that earnings growth is off the table for most S&P 500 companies in the first half of 2023. The question is how bad the decline will be and how the outlook for the 2nd half will unfold. Last year, there was supposed to be an improvement in the 2nd half that never fully materialized and was offset by inflation and interest rates. That situation may unfold again this year and leave the S&P 500 index at or below 3,500 at year-end.