Stocks have been on the brink of a bear market ever since President Trump announced substantial tariffs on April 2nd. Economic concerns due to the trade war have caused stock prices to plummet. Goldman Sachs predicts that the S&P 500 could decline by about 7% in a full recession scenario. Historical data suggests that recessions typically lead to more significant stock market declines than what has been observed recently.

Since the introduction of tariffs, the stock market has been unstable, and investors should prepare for further losses if a recession occurs. Goldman Sachs analysts project that the S&P 500 could drop to 4,600 in a complete downturn scenario, representing a 7% decrease from current levels and a 25% decrease from its peak on February 19th.

There is growing concern among financial experts about a potential recession, with JPMorgan's CEO, Jamie Dimon, highlighting the risks of a tariff-related economic slowdown. This has led to speculation that the Federal Reserve might need to lower interest rates to support the economy, with market expectations pointing towards a 100-basis-point reduction by the year's end.

The recent market downturn has erased a significant portion of the gains made in 2024, with the S&P 500 falling by approximately 14% in less than a week. Goldman Sachs now considers a recession as the most likely scenario. However, investors may not yet be fully considering this possibility, as historical data suggests that larger interest rate cuts than currently anticipated are typical during recessionary periods.

Furthermore, traditional recession indicators such as stock market volatility, credit spreads, and the yield curve have not reacted significantly to the increased likelihood of an economic recession.