Why fears of US recession are justified

The bubble in artificial intelligence stocks has started to pop, two decades of easy money in Japan have finally started to come to an end, and (after hitting all-time highs) share values are being reassessed. There are plenty of plausible explanations for the sudden plunge in stock markets around the world over the last few days. And yet the big one is this: investors have started to worry that the global economy is heading into a recession, and they are surely right to do so. 

The markets are often volatile. Even so, the trading over the last few days has been wild, with Japan’s Nikkei dropping by 12 per cent in a single day, its biggest fall in 37 years, and then bouncing back by 10 per cent on Tuesday morning, and with savage sell-offs on Wall Street and the major European bourses that erased most of the gains of the last few months.