A drop in stock prices, driven primarily by pessimism regarding the economic outlook, is increasing the risk that a recession may arrive sooner than has been predicted by many professional forecasters, writes Vivien Lou Chen for the Market Watch.

“The impact of financial markets, in many ways, contributed to the situation of an overheating economy and rising prices,” said Mark Heppenstall, chief investment officer of Penn Mutual Asset Management. “Falling asset prices will work in the opposite way: the evaporating wealth effect and psychological impact of what markets are telling people can tend to spiral.”

Heppenstall, whose company manages more than $33 billion from Horsham, added that the slowing growth is “almost certainly in the cards and the steeper the falloff in asset prices, the increasing odds of a recession happening sooner rather than later.”

A similar dynamic was seen in the 2008 financial crisis.

The Great Recession stemmed from a “confluence of events, but part of the equation had to do with a total evaporation of liquidity in the markets and a huge bear market in equities,” said Heppenstall.

Read more about the possible recession and chief investment officer of Penn Mutual Asset Management Mark Heppenstall thoughts in the Market Watch.