The 40% drop in the Summer of 2008 slowed down the economy but it was insignificant on an annual basis. 2007 and 2008 had the same annual GDP ($14.3 trillion) and 2009 showed modest growth. Therefore this year's 15% financial market drop should have little effect on the economy.
But is it more serious?
I see four negatives. One is the always pending attack on Iran that is anticipated by the financial markets in negative terms. Second, we could be hurt by our own protectionism. Third, the stimulus might have hurt. The other is the possibility that we are in a Kondrafieff wave decline.I can't predict the Iranian issue. I think the negative repercussions of a Straits of Hormuz oil spike are already fully discounted (the price of securities is too low in general and incorporates the Iranian scenario).
The second is the blow-back from the malicious protectionism of the Democrats and our ideologically backward President. I don't see that as a major factor. Maybe a few hundred billion in penalties, but that is not much. Protectionism is stupid but not having much impact.
The stimulus created jobs for a few million of the 10 million government employees and some highway workers at a cost of several million dollars per job. But we waste money like that all the time and it has no effect. It may have cost a few hundred billion in wasted resources but that again is trivial.
Lastly, I learned about the Kondratieff wave in econ grad school. It is a long 50 year wave, 25 years from peak to trough. Since the modern economy is less than 150 years old, there hasn't been much time to observe such waves. As I look at the clear trough in 1930-40 I try to get a 50 year cycle to fit the data in the meantime (70 years) and I can't. So I dismiss that concern.
There are three monumental positives. Our labor force is very productive these days, benefiting from two decades of productive gains from computers, the Internet, telecom, our global expansion and transportation.
We are in the midst of much greater productivity increases from the latest changes in the Internet, global specialization and in telecom improvements.
Lastly we are on the cusp of bountiful, cheap natural gas energy.
The financial markets should do well in the next twelve months.