Bloomberg Surveillance · Monday, September 28, 2026
Lori Cavacina of RBC Capital Markets has developed a 'four tiers of fear' framework to categorize market drawdowns. She explains that tier one is a typical 5-10% drawdown, tier two involves fears of recession or unexpected events leading to 14-20% losses, tier three signifies recession pricing with a 25-33% drop, and tier four represents extreme meltdowns like the tech bubble or GFC with 40-60% losses.
“So this was, you know, this is honestly, it's just a list of drawdowns based on my kind of lived experience in financial markets.”
“And so we have tier one garden variety, five to 10% drawdown that would take you to 7,070, 400 on the S & P.”
“Tier three, recession pricing, you lose a quarter to a third of the market value. I joke with tier four, we don't talk about those. Tech bubble meltdown, GFC, one was down 40, one was down 60. We approximate, you lose half your value.”