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Amadeo ’17 (Kimberly Amadeo – MS in Social Planning @ Boston College, MS in Management @ MIT, reports on Economic and Business news, has 20 years senior-level experience in economic analysis and business strategy working for major international corporations, “Will the Next Stock Market Crash Cause a Recession?’ 22 August 2017, https://www.thebalance.com/could-a-stock-market-crash-cause-a-recession-3306175)
The next stock market crash can easily kick-start a recession. That's because stocks are shares of ownership in a company. As a result, the stock market reflects investors' confidence in the future earnings of all these companies. Corporate earnings are dependent on the health of the U.S. economy. That means the stock market is also an indicator for the U.S. economy itself.
A crash signals a massive loss of confidence in the economy.
When confidence is not restored, it leads to a recession. That's because declining stock values mean less wealth for investors. Consumer purchases drive almost 70 percent of the economy. See What Are the Components of Gross Domestic Product?
It also means less financing for new businesses. The sale of stocks is one way that companies can get the funds needed to grow. See How Do Stocks and Stock Investing Affect the U.S. Economy?