Even with Tuesday's sell-off, global stocks likely have further to fall if the United States is indeed in a recession, and markets follow...

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Even with Tuesday’s sell-off, global stocks likely have further to fall if the United States is indeed in a recession, and markets follow their historic trend, according to Citi Investment Research.

Since 1973, the MSCI world index has dropped an average of 2.3 percent through a U.S. recession. That dip is modest, but it includes a steep fall and a subsequent rebound. On the way down, global stocks fall 10.1 percent, on average, through the first half of a U.S. recession. Through Monday’s close, they were down about 6.6 percent. On the way up, worldwide stocks climb 8.5 percent, on average, during the second half of U.S. recessions, which typically last 11 months.

When recessions begin is tough to pinpoint; the official arbiter — the National Bureau of Economic Research — declares them after the fact. Robert Buckland, global equity strategist for Citi Investment Research, says many economists think a recession began Jan. 1, based on a housing slump and tight credit markets.

Economic weakness appears to be spreading: The World Bank this week cut its expected 2008 growth rate for China to 9.6 percent from 10.8 percent, due, in part, to cooling export demand. The International Monetary Fund sees world economic growth slowing to 4.1 percent this year from 4.9 percent in 2007.

The MSCI world index has already lost nearly as much as its historic average decline in the first half of a U.S. recession, yet Buckland warns against buying too soon. He expects analysts to chop earnings estimates for the year. Currently, they predict global earnings growth of 13 percent over 2007, Buckland says. If a U.S. recession follows the trend, those numbers may be cut by 30 percent.

Many investors have been moving money overseas in search of better returns. But Buckland says no one region has held up better than others in past U.S. recessions.