Stock Market Crash: 15-20% Drop Likely With Recession, warns Economist

History shows a recession would mean a rough ride ahead for the stock market, Goodwin said.

She pointed out that the median GDP drawdown during recessions since World War II has been 2.5%, while unemployment has jumped a median 3.4%, and earnings have fallen a median of almost 21%. "Further market volatility could arrive as recession does. For example: even if valuations in the S&P 500, measured by the price-to-earnings ratio remained stable, then the median 21% drop in earnings per share cited above would result in an S&P 500 correction of 15-20%," she said.

With the index trading around 4,300 currently, a 20% drop would bring it down to around 3,425. Earlier this week, it officially reentered a bull market after advancing 20% from its lows in October. Goodwin said that unemployment may not start rising until the fourth quarter this year, given the lag effect of rate hikes.of Piper Sandler told Insider in May that he expects stocks to fall another 25% by year-end as the economy begins to slow and jobless claims rise.

He highlighted that year-over-year growth of jobless claims is likely to turn positive soon, signaling a recession, and that negative earnings growth estimates have dipped negative, also a reliable signal of a downturn."I feel like a weather man who's coming out at the end of May and saying, 'In December it's going to be cold.

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