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I'm thinking more precisely in the current situation of USA. I don't have the data at hand right now, but the Stock market in the USA has grown in the past decade faster than any other country in the world(probably due to QE).Many think that the stocks have been overvalued for quite some time. Yesterday, the FED shared some concerns about a possible slowing down of the economy, and yet it did not showed signs of wanting to stop increasing the rates as much as the market thought it would, i.e. it's less dovish(or more hawkish) than many thought.

I'm wondering if a country can avoid a recession, meanwhile the stock market valuations of an index representing its economy decrease. For how long, and what magnitude of drop in value can the country withstand? Only short-run? Even with great volume losses like in 1989?

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  • $\begingroup$ (1) The question title needs to be fixed - “...even if the stock market is [what?] for...”. (2) You need to be a little more specific about the decrease. Stock prices can obviously fall over the period of a week without there being a recession, and that is certainly “short term.” $\endgroup$ – Brian Romanchuk Dec 20 '18 at 12:51
  • $\begingroup$ @BrianRomanchuk thanks for pointing that out. Hopefully the question now has been improved to the point of eliciting an answer by a user. $\endgroup$ – An old man in the sea. Dec 20 '18 at 17:05
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    $\begingroup$ There’s a famous Paul Samuelson quote “The stock market has forecast nine of the past five recessions.” I am unsure how much we can advance beyond that. Keep in mind that stock prices are based on forecasts of profits/cash flow, not GDP. $\endgroup$ – Brian Romanchuk Dec 20 '18 at 22:36

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