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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Bank of America raised the risk of recession in the next year to one in three, while U.S. bond interest rates continued to fall. The ten-year U.S. Treasury Bond interest rate fell again to about 1.5%. Lower bond interest rates show that investors expect economic growth to slow at best, and the economy to fall into recession at worst. The so-called ‘inverted yield curve,’ where long-term interest rates on bonds fall below shorter-term interest rates continue to flash a warning of a coming recession.

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