3 Reasons Markets Could Get Worse Before They Get Better

She noted that markets usually hit bottom about six months before a recession ends.

3. Weak earnings ahead.

"We do think earnings still need to fall further," Carey Hall said.

While corporate leaders have shown optimism on earnings calls, "actual guidance has been weak. Corporates have been resilient, margins only contracted slightly this quarter but there's a lot of cross-currents going on right now."

Small Caps and Other Bright Spots

"The market's still not fully pricing in a recession in our view," she continued, "so there's more opportunity in pockets of the market, areas like small caps that have been more adequately pricing in the risks and where we can see more upside."

She continued: "We do think it's more of a year about picking your spots, active management over passive, we think the rest of the market outside the top 50 megacaps looks more attractive than the megacaps." 

Tech looks risky, she added.

"Even amid all the layoffs, their labor relative to the real sales growth is still relatively bloated," said Carey Hall. Things that have benefited tech stocks for years, such as low interest rates, are reversing, she said, adding that it's a cyclical sector.