IMF director: Further 20 percent drop in stocks ‘certainly possible’

The director of monetary and capital markets at the International Monetary Fund (IMF) said on Tuesday that a further 20 percent drop in U.S. stocks is “certainly possible,” as recession fears continue to grow.

“It’s certainly possible,” IMF’s Tobias Adrian told CNBC. “It’s not our baseline, but that is something that is possible.”

The remark from Adrian comes after JPMorgan Chase CEO Jamie Dimon suggested that the S&P 500 could continue to fall and warned that the U.S. will likely face a recession next year. The S&P 500 has already fallen by about 25 percent so far this year.

“It could be another easy 20 percent,” Dimon said to CNBC on Monday, of the S&P 500. “And I think the next 20 percent will be much more painful than the first.”

The stock market has garnered losses in recent weeks following various reports linked to the state of the economy including the Labor Department’s jobless claims, talks about the Fed once again hiking interest rates and the current rate of sky-high inflation not seen in 40 years.

Data released from the Labor Department Wednesday showed wholesale inflation rebounded after two months of price drops. The producer price index increased 0.4 percent in September. Economists had originally predicted a 0.2 percent increase last month.

Adrian said in Tuesday’s interview that the IMF does not have a specific figure for its “baseline,” but expects financial conditions to continue to tighten. He added that he believes Dimon’s comment was referring to a possible “shift in sentiment” that would “feed back into economic activity.”

The IMF on Tuesday cut its global growth forecast for 2023 to 2.7 percent growth, noting that “the worst is yet to come and, for many people, 2023 will feel like a recession.” Within the U.S., the IMF said growth is expected to slow to 1 percent.