Stock markets plunge 12% amid coronavirus fears
The global financial markets are facing a volatile time as coronavirus fears sent United States stocks plunging to the lowest mark since 1987.
The S&P 500 sank 12% on March 16, despite the US Federal Reserve’s move to slash interest rates close to zero. The S&P has completely lost its 2019 gain and is currently almost 30% down from an all-time high.
Investor uncertainty is driven by the partial lockdown of the US, the largest economy in the world by nominal gross domestic product (GDP).
“This is different. The thing that is scarier about it is you’ve never been in a scenario where you shut down the entire economy. You get a sense in your stomach that we don’t know how to price this and that markets could fall more,” said Steve Chiavarone, a portfolio manager with Federated Investors.
Global recession underway
With companies around the world scaling back activities to comply with local governments’ calls for social interaction limitation, economists are predicting a recession in the global economy after the second quarter’s poor performance.
“I think the odds of a global recession is close to a 100% right now. I think in the US. We are going to have a terrible second quarter. At the Lindsey Group, we just ran the numbers carefully over the weekend. I think in the second quarter, it is going to be -5%. And we think the jobs numbers in early April might be as much as minus one million or so, because nobody is going to get hired. The point is you are going to have a really bad quarter. If you are going to have recession, you are going to have two bad quarters,” said Kevin Hassett, former chairman of the US Council of Economic Advisers (CEA), to CNN.
Virus could last until summer
The reaction from stock markets came after President Donald Trump announced that the virus could last up to the northern hemisphere’s summer and urged all Americans to follow health officials’ recommendations.
“My administration is recommending that all Americans, including the young and healthy, work to engage in schooling from home when possible, avoid gathering in groups of more than 10 people, avoid discretionary travel and avoid eating and drinking at bars, restaurants and public food courts. If everyone makes this change or these critical changes and sacrifices now, we will rally together as one nation and we will defeat the virus,” the president said at a White House press conference.
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