1. The stock market will get hit first and hardest. The reason for this is simple; during a recession, household income decreases thus reducing household expenditures. In other words, people are spending less money. Companies therefore, make less money, resulting in lower earnings and share prices.
2. Inventories decrease because businesses cut production and draw on their stored resources. This compounds upon the lack of demand that already is hitting the company, and normally causes unemployment to go up because employers lay off employees that they no longer need.
3. Since work is harder to find, general wages decrease.
This is a very different market than investors are used to dealing with. Most of the people owning stock and mutual funds today haven't lived through anything resembling a bear market or a slowing economy.
