Just before too many people (like Ken Fisher) herald the resumption of the bull market in all things financial, it is probably worth noting the findings of Larry Hatheway, global economist at UBS. He has published a piece of simulation analysis testing whether the current dislocation will have a wider economic fallout.
Will the financial shock become real? Here’s Hatheway’s conclusions:
Our findings suggest they are. A sustained rise in credit risk premiums, a lengthy correction in global equity markets, and a 10% fall in US house prices could shave
more than one percentage point off of global GDP growth, if not offset by monetary easing. US growth suffers the most, largely because of the impact of falling US house prices.
The impacts on other economies are somewhat smaller. Still, our findings suggest that the ECB and other central banks will face more uncertain outcomes as they deliberate policy in the coming weeks and, indeed, they may have to consider easing if dysfunctional capital market conditions and weak asset prices persist.
The simulation results reflect the ‘risk case’ of more sustained market dislocations than our base case assumes. Clearly, however, global risks to growth will become a
legitimate concern if markets don’t soon stabilize. Finally, the simulation results support our below-consensus forecast for US GDP growth and reinforce the fundamental justification for our longstanding call for Fed easing in H2 2007.
So maybe keep those tin hats to hand. 
