The horrible start to the year in stocks may begin to become the tail wagging the dog, causing the very economic turmoil it is supposed to be forecasting, strategists at JPMorgan Chase warned Tuesday.
So far in 2016, a global sell-off due to concerns about the health of China's economy, along with sharp losses in the energy complex, has pushed most major stock benchmarks into correction or bear market territory.
"There is increasing risk that elevated volatility starts incurring enough technical damage to market psychology and spills over, negatively impacting investor, consumer and business sentiment, resulting in a lack of risk-taking, and eventually creating a negative feedback loop into the real economy," wrote JPMorgan U.S. equity strategist Dubravko Lakos-Bujas. He doesn't predict a technical recession for the economy, but rather an "earnings recession" where S&P 500 profits decline.