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Markets Tank on Ominous IMF Report

Ian Wyatt

The IMF just uttered the dreaded “R” word. Predictably, investors are panicking and stocks are tanking.

Another global recession may be imminent, the International Monetary Fund said ahead of its annual fall meeting today. Risk of a second recession in four years is “alarmingly high” at the moment, the IMF said.

That was enough to spark a fairly sizable sell-off.

Markets were basically flat until the IMF released its report around 10:30 a.m. eastern time this morning. Now all three major U.S. indices are down at least half a percent.

The Nasdaq has had the steepest drop-off, falling 1.3% as of 2 p.m. eastern. It has now fallen 2.5% in the last three trading days.

Meanwhile, the S&P 500 is down 0.75%, while the Dow Jones Industrial Average has declined 0.6%.

Markets never react well to the word “recession” – especially in these financially troubled times. However, the IMF’s definition of a recession is different from the traditional version.

According to its World Economic Outlook report, the IMF predicts that the world economy will grow just 3.3% this year and 3.6% next year. Both projections would be slower than the 3.8% growth in 2011 and the 5.1% growth in 2010.

By the IMF’s definition, that constitutes a recession – a slowdown in growth, though not complete backtracking. Worse yet, the organization warned that avoiding such a downturn will be more complicated this time than in 2009, when most struggling nations addressed the problem by adopting stimulus measures.

One bit of good news from the IMF’s report: America’s growth forecast for 2012 actually increased slightly from its previous forecast.