CHART: The horror impact of a China hard landing on stocks

Photo by Chris Graythen/Getty Images

Societe Generale’s cross asset strategy team’s October research note, an epic 63 page monster that investigates the impact on global growth and financial markets from a hard landing in China, has certainly got the markets talking. Given heightened concerns over the outlook for the world’s second-largest economy – something that has contributed to substantial financial market volatility over the past three months – the note is not only timely, it’s resonating with investors.

One chart in particular has found stardom among the investment community – a prediction of what a hard landing in China would do to the US S&P 500 stock index.

There’s little wonder why is creating such a stir.

Resembling a waterfall, or a cliff base jumpers would leap off, it suggests a theoretical drop in China’s GDP growth rate from 6.9% in 2015 to 3.0% in 2016 could see the benchmark US index tumble back to its GFC lows Рsome 1,300 points below its current trading level.

Thankfully, Soc Gen don’t attach a high probability of a hard economic landing in China occurring, putting the odds at just 10%.

Hopefully they’re right. Otherwise the correction in stocks – not only in the US but globally – is likely to be substantially more than that.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.