The stock price rout was led by Japan, where stock prices fell 12%, the worst day since “Black Monday” in October 1987, when U.S. stocks fell 22%, the worst one-day fall ever. A particular factor in Japan was that the Japanese central bank raised interest rates last week, causing a sharp jump in the value of the Japanese yen.

Back in the United States, the so-called “magnificent seven” of tech companies, including Alphabet (parent corporation of Google), Amazon, Apple, Meta (parent company of Facebook), Nvidia (maker of chip used in artificial intelligence applications) and Tesla have been leading the stock market higher for months.But on Monday, these stocks fell harder on average, as doubts about the profitability of AI joined with recession fears.

Falling stock prices are not a good predictor of a coming recession – in fact the biggest fall in October 1987 had little impact on the economy. But a sustained fall could affect spending by the wealthiest Americans, who own most stocks. As more and more working-class Americans have been cutting back on purchasing and turning to credit cards for necessities, wealthy Americans have kept up spending.

More worrisome is that many economic signs are pointing towards an economic slowdown that could lead into a recession. Claims for unemployment are on the rise. More and more credit card and car loan borrowers are falling behind on their payments. The manufacturing sector has been shrinking, albeit slowly.

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On Friday morning the Department of Commerce released its latest report on Gross Domestic Product or GDP for the July through September period. While President Trump hailed the headline figure of 3.5% growth in GDP, there were serious signs of weakness in the quarterly report. Most the of the growth (2.1% of the 3.5%) actually came from a buildup of inventories of goods on shelves and in warehouses, not from actually selling more goods and services. GDP measures the production of goods and services, but products that are not sold can pull down future production as businesses try to reduce their stocks of inventories.

The latest GDP report also showed that investment spending on business plant and equipment and residential structures (homes, townhomes, condos, and apartments) actually fell from July through September. While the fall was small (less than one-tenth of one percent), it is the first drop in three years. For investment to fall at a time when the economy is booming and corporations are flush with cash from the big corporate tax cuts that went into effect this year is a sign that businesses don’t think that the good times will continue. While the stock market itself is a poor indicator of the future of the economy, almost every recession since World War II (when the government began collecting more economic data) has been led by a fall in business spending on structures and equipment or in housing construction.

The biggest fall was in the construction of new residences, which has been hard hit by rising interest rates and increases in home prices that have raced ahead of smaller gains in wages. Investment spending in new residences has now fallen for three quarters (nine months) in a row and the decline seems to be picking up. The decline in business structures (factories, offices and other commercial buildings) was even bigger but offset by an increase in spending on computer software.

The weaknesses in the GDP report just add to the list of worries about the economy. The number of corporations beating their sales estimates has been falling, adding another concern to the stock market. Trump’s trade war with China is set to escalate in January, when tariffs on about half of all imports from China jump from 10% to 25%. Worries about debt are on the rise, from countries like Argentina and Turkey, which borrowed big-time in U.S. dollars to the ballooning market for so-called ‘leveraged loans,’ made by non-banks to corporations and now estimated at more than $1.6 trillion.

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