When a correction turns into a bear market: What explains the depth of the stock market drawdown? A discretionary global macro approach

In this article, we aim to explain what causes the depth of a stock market drawdown using discretionary global macro approach. Our key finding is that increase in credit risk high/very high level after beginning significantly explains drawdown. An expected aggressive monetary policy tightening can trigger correction, especially if accompanied with recession probability. Further, an easing, as sign imminent recession, deepen total However, depends whether transitions ultimate crunch stage.