The coronavirus shockwaves rippling through U.S. stocks are forcing investors to...
NEW YORK - The coronavirus shockwaves rippling through U.S. stocks are forcing investors to contemplate outcomes more dire than a recession, including several quarters of declining economic activity, a credit crisis or even a depression.
Forecasters at Goldman Sachs and other banks are now projecting a steep economic contraction in at least the second quarter as governments in the United States and Europe start shutting restaurants, closing schools and calling on citizens to stay home. “A 2008-like financial contagion is not yet priced into this market,” Donald said, but she added the market “probably won’t have any reassurance that we have avoided that 2008-type scenario completely until we see a calming of credit spreads and the pace of Covid-19 cases starts to decline.”
Data out of China, where the pathogen originated late last year, underscored just how much economic damage the disease had already done with industrial output plunging 13.5% and retail sales 20.5%. Strategists at Deutsche Bank said in a note last week that the market’s recent volatility, marked by the swings of over 3% in the S&P 500, was coming at “a frequency previously seen only in the Great Financial Crisis and the Great Depression.”
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