How to estimate S&P 500 downside risk

As we approach Q3 earnings season, the Street cut the bottom-up S&P 500 forward 12-month EPS estimates by an estimated -0.41% as recession anxiety begins to rise. The good news is the market is trading at a forward P/E of 15.8, which is below its 5- and 10-year averages.

In light of the heightened recession risk, what's an appropriate valuation for the S&P 500? What's the downside risk from here?

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