Equity Market Valuations in a Changed NGDP World

We have obviously had a material sell off in equity markets as stocks have had to re-adjust to a changing interest rate/economic backdrop. The question is fast becoming, are we near a bottom? Year to date, the S&P 500 is down around 20% and the Russell 2k and Nasdaq are both down closer to 30%. And the headline numbers actually mask some of the pain that has been felt under the surface.

Looking at just the Russell 2k, this is now the biggest drawdown from all time highs to not take place in either a recession or financial crisis.

Russell 2k Drawdowns of greater than 30%: Circled are non recession financial crises all other cases since 1980 have been recessions.

The question of a bottom I think is improperly contextualized. We are not in the pre covid era of low inflation variance and zero interest rates. The Fed “put” is not always ITM (in the money) and ready to rescue asset prices as the “cost” in a low inflation world was very negligible. This is of course not the case anymore.

So the real question is not, are we near a bottom in stocks, but what should “normal” equity market valuations look like in this changed nominal GDP/policy world post Covid era?