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'D' word rears head as coronavirus-hit markets brace for recession

Video credit: Reuters - Politics
Published on March 17, 2020 - Duration: 01:54s

'D' word rears head as coronavirus-hit markets brace for recession

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.

This report produced by Zachary Goelman

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'D' word rears head as coronavirus-hit markets brace for recession

The stock market on Tuesday was able to claw back some of its losses after Wall Street saw its biggest one-day drop since the 1987 crash.

The whipsawing of markets mirrors the shockwaves rippling through the financial world, amid growing worries that central banks and governments may not be able to contain the economic fallout of the coronavirus pandemic.

Peter Tuchman trades on the floor of the New York Stock Exchange.

(SOUNDBITE) (English) QUANTOS SECURITIES TRADER PETER TUCHMAN, SAYING: "People are sort of, basically, understanding that the global economic implications of theme parks closing, casinos closing, airports are empty, streets are empty.

If cities are, sort of, ghost towns, you know, this is going to effect the consumer, it's going to affect every industry down the line." Further weakening confidence, President Donald Trump on Monday for the first time acknowledged the U.S. could be about to enter a recession.

(SOUNDBITE) (English) EXCHANGE BETWEEN REPORTER AND U.S. PRESIDENT DONALD TRUMP: REPORTER: "Is the US economy heading into a recession?" TRUMP: "Well, it may be.

We're not thinking in terms of recession, we're thinking in terms of the virus." Forecasters at Goldman Sachs and other banks are now projecting a steep economic contraction as governments in the United States and Europe start shutting restaurants, closing schools and calling on citizens to stay home.

But some are contemplating an outcome even more dire than a recession: a credit crisis, or even a depression.

Many say a recession is already priced into the market.

In past recessions, the S&P 500 has fallen 28% from peak to trough, according to an analysis of the past 70 years from Keith Lerner, chief market strategist at Truist/SunTrust Advisory Services.

As of Monday's close, the benchmark index had declined 29.5% from its Feb.

19 closing record high.

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." Wall Street's focus is now on what fiscal policies governments will enact, and even more so, on what can be done to contain the virus.

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