We first consider a sharp correction, where stock prices fall 20% in Q1 and stay flat afterwards, reminiscent of the 20% Black Monday crash in 1987. In this scenario, we estimate that the growth impulse from equity prices turns from a +0.6pp boost currently to a -0.5pp drag by early 2019 on a 4QMA basis, as shown in Exhibit 4. All other things equal, this bear market would still result in positive GDP growth in 2018 of 1.9% on a Q4/Q4 basis—significantly below our 2.6% baseline forecast—but have only a minor negative effect on growth in 2019.
Having brought up the nightmare scenario, Goldman then amicably concludes:
"We conclude that the recent run-up in equity values is a key contributor to current strong growth, and that sharp stock market moves represent an important two-sided risk to our constructive near-term growth forecast."
https://www.zerohedge.com/news/2018-01-25/goldman-shows-what-market-crash-will-do-economy
