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Could The Coronavirus Outbreak Trigger A Recession?

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  • Global equity markets were battered the week of Feb. 24 as the coronavirus spread beyond China.
  • Potential measures to contain the virus, such as the closure of businesses and schools, will depend on each country's appetite for containment.
  • There is a possibility that the coronavirus outbreak could tip the globe - and the U.S. - into a recession.

On the latest edition of Market Week in Review, Quantitative Investment Strategist Dr. Kara Ng and Head of AIS Business Solutions Sophie Antal Gilbert discussed the latest on the coronavirus outbreak and its potential impact on global markets and economies.

Markets plunge as coronavirus fears grip investors

Global equity markets were battered the week of Feb. 24 as the coronavirus spread beyond China, Ng said, with the S&P 500® Index down approximately 15% from its all-time high on Feb. 19, as of midday Pacific time on Feb. 28. The U.S. 10-year Treasury yield also sank to a new record low of roughly 1.2%, she added.

In recent days, the coronavirus has spread rapidly through South Korea, Italy and Iran, Ng said. "The outbreak in Iran is of particular significance, because much of the Middle East lacks the infrastructure to properly contain the virus," she explained. Meanwhile, the outbreak in Italy has spread to many countries in the European Union, threatening to severely disrupt supply chains in the region, Ng noted.

In addition, she said that the recent news that a coronavirus case in the U.S. was unable to be traced back to China is sparking additional worries in America, as it suggests that the virus may become more prevalent in the U.S. than statistics currently show.

The ultimate impact of the virus' spread is not clear, Ng said. "U.S. and global economic activity and earnings growth will take a hit," she stated. However, the duration of the setback may vary among markets and economies, Ng added. "Markets are generally forward-looking, and may bounce back fairly quickly once the coronavirus is contained, while a rebound in economic activity and corporate earnings will likely take longer," she noted.

If coronavirus continues to spread, will businesses actually close?

Potential measures to contain the

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