Volatility gripped financial markets as fresh turmoil at Credit Suisse days after the collapse of some American regional banks spurred a frantic rush for shelter, evoking memories of the 2008 global financial crisis and bolstering speculation that major central banks will have to curb their hawkishness to prevent a harsher economic landing.

Equities trimmed a slide that at one point topped 2% for the S&P 500 as Switzerland’s central bank and financial regulator said Credit Suisse will receive a liquidity backstop if needed, in an effort to arrest the slump in confidence around the troubled lender. A gauge of U.S. financial heavyweights like JPMorgan Chase and Citigroup also pared losses, but still sank to the lowest level since November 2020. First Republic Bank led a rout in U.S. regional peers after being cut to junk by two major credit firms.

Wall Street’s so-called fear gauge touched its highest level since October after being relatively subdued for the most part this year. As investors dashed to the safest corners of the market, gold reversed an earlier slide and the dollar rallied against all of its developed-market peers except the Japanese yen.

Bond yields plunged globally as mounting financial-stability concerns prompted traders to abandon bets on additional rate hikes and begin pricing in cuts by the Federal Reserve. They priced in a drop of more than 100 basis points in the U.S. policy rate by year-end and downgraded the odds of additional tightening by the Bank of England and the European Central Bank.

Banks that trade with Credit Suisse rushed to safeguard their exposure with the lender on Wednesday, snapping up contracts that will compensate them if the crisis rocking the Zurich-based firm deepens. So intense was the demand for the derivatives, known as credit-default swaps, that they spiked to levels that signal the lender is in deep financial distress – something unseen at a major global bank since at least the throes of the financial crisis.

The renewed bout of banking turbulence spurred some worrisome remarks from prominent Wall Street voices.

As Credit Suisse nosedived, economist Nouriel Roubini – who’s known as “Dr. Doom” – said the troubled lender might be “too big to be saved.” BlackRock’s Larry Fink noted that the banking crisis could worsen, worrying aloud about cracks in the financial system that formed during more than a decade of easy money and low interest rates. Bridgewater Associates’ Ray Dalio expects problems to start mounting in the fallout from contractions in debt and credit markets, saying the recent failure of Silicon Valley Bank was just a “canary in the coal mine.”

“Are the dominoes starting to fall?” Fink, chairman of the world’s largest asset manager, said in a letter on Wednesday. “It’s too early to know how widespread the damage is.”

With the banking turmoil rippling through financial markets, Bob Michele, the chief investment officer of JPMorgan Asset Management, warned of an economic hard landing.

He now expects the Fed to pause rate hikes next week, saying that a recession is “inevitable” and that the best investment strategy right now is to stick to high quality bonds. Michele reckoned the whole Treasury yield curve will come down to as low as 3% by August, but he stopped short of predicting the end of a hiking cycle. The 10-year rate is currently near 3.5%.

Now that’s not to say everyone is buying the idea of a “financial crisis 2.0” at this stage.

Lisa Shalett at Morgan Stanley’s wealth management division stopped short of buying into the latest mega-bear-case on equities – namely that the failure of three American banks would be a prelude to a crisis such as the one that laid global economies low in 2008.

She says the collapse of a few regional lenders was mostly driven by poor risk management at a time when the Fed is aggressively tightening monetary policy to slow the economy. While more banks are likely to fall, Shalett considers the threat to the broad financial industry and economy as contained.

“Remember, in the great financial crisis, there was a lot of this that was about cross-counterparty credit risk,” she told Bloomberg Television. “This is less about immediate contagion.”

No matter how bullish or bearish traders are, there seems to be consensus on at least one thing: volatility should continue dominating the financial world for now amid so many uncertainties.

“The emotions of investors remain high, and shrinking liquidity is pouring gasoline on volatility in the equity and bond market,” said Mark Hackett, chief of investment research at Nationwide. “The market remains susceptible to continued pressure until confidence in the system returns.”