The Australian share market is down more than 20 per cent since its highs in March 2015, and Chinese shares are off 49 per cent from their highs.
The current state of the market is in some ways "reminiscent of 2008 with tightening credit markets [and] bank shares under pressure”, said AMP Capital’s chief economic economist Shane Oliver.
But amid the carnage, there is reason for optimism, according to Dr Oliver.
"Another GFC-style credit and banking crisis is unlikely," he said. "Banks in the US, Europe and Australia are better capitalised now."
He added: "US and European bank exposure to energy loans at around 2-4 per cent of total assets is a fraction of their exposure to housing loans, which were at the centre of the GFC."
In addition, new restrictions on proprietary trading have limited banks’ exposure to riskier corporate debt, Dr Oliver said.
"The issues of low transparency and complexity that plagued the subprime mortgage market are not really an issue in corporate debt markets now," he said.
"So far we are not seeing any blow-out in inter-bank lending rates relative to official interest rates in contrast to what we saw in 2007-2008 as bank funding costs soared."
He added: "Similarly, we remain of the view that a US [driven] global recession is unlikely, albeit with a 25 per cent probability."