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The global economy is already in a moderate slowdown, but the chances of a major recession are growing, and that poses downside risks for stocks in the coming year, according to Ned Davis Research.

Analysts at the research firm wrote that their Global Recession Probability Model is now at 98.1 percent, which is a serious signal. Similar high rates were during the pandemic recession of 2020 and during the Great Financial Crisis of 2008-2009.

But even before the geopolitical fallout from Russia's war in Ukraine, the Ned Davis Global Recession Probability Model was already in the high risk zone, marking an early macroeconomic sign of a year-end equity drawdown.

Indicators point to a growing chance of a serious recession sometime in 2023, but "based on historical norms, a moderate global slowdown has already been factored into the prices of most asset classes this year, while a serious global recession has not."

Ned Davis Research pointed to another signal of decline, the OECD composite leading indicator, which fell to 98.7 last month and has been falling for 13 of the past 14 months and remains below its long-term average of 100.

As with the global recession probability model, this low level of this indicator has only been seen in 2020, 2008-2009, and the early 2000s.

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