The coronavirus epidemic could spark an economic recession and a threat to the re-election campaign of US President Donald Trump, according to Moody’s Analytics Mark Zandi.
Coronavirus pandemic could push the economy into a financial downturn
The economist indicates that Wall Street might be underestimating the impact of the epidemic. Zandi indicates that the probability of an economic recession is growing following a week in which stocks saw their worst since the 2008 economic crisis. For instance, the S&P 500 is down 14% since its record high on February 19, and it is currently sitting on the lowest level since October. On the other hand, Dow just experienced its worst weekly point drop ever. He said that if the Fed eases the monetary policy, then the economy will be back up and running fast, but that is unlikely to happen.
Currently, it is like the Federal Reserve does not have room to maneuver, and policy is not up to the task of getting the economy up and running again fast. Before the outbreak of the coronavirus, the conditions were favorable for a correction, but following the outbreak, that has become less likely. Although anything could have pushed back the markets, the impact of the coronavirus has been very substantive.
COVID-19 outbreak could hurt Trump’s re-election campaign
Besides hurting the economy, the outbreak could hurt President Trump’s re-election bid. Currently, confidence is low because Trump doesn’t seem to be on the same page with the experts on the matter, CDC. As a result, this is a massive threat to his 2020 re-election bid. Medical emergency response to coronavirus is very important, but a financial crisis sparked by the outbreak could politically be catastrophic.
Zandi indicated that chances of an economic downturn are high, and if the most likely scenario is considered of which the CDC is right, then avoiding one will be hard. According to historic corrections in the market, it seems that investors are aware of the risks of recession resulting from the coronavirus pandemic. The White House has not commented on Zandi’s remarks.