Moody’s analytics Mark Zandi appeared on CNBC and warned that a coronavirus pandemic would spark a deep recession and pose a “significant threat” to President Trump’s re-election.
Mark Zandi put the odds of a recession at even or worse.
“They’re at least even odds.” Zandi mused “If you take the most likely scenario and the CDC is roughly right, then it’s pretty hard to avoid one.”
CNBC reported that Mark Zandi warns Wall Street is underestimating the damage from a coronavirus pandemic — both on the economy and President Trump’s re-election campaign.
Not only is the response to the medical emergency key, an economic downturn sparked by the coronavirus would be political kryptonite.
According to Zandi, the probability of a recession is jumping.
“They’re at least even odds,” he said. “If you take the most likely scenario and the CDC is roughly right, then it’s pretty hard to avoid one.”
The market’s historic correction suggests that many investors are cognizant of the recession risks associated with a coronavirus pandemic.
Stocks saw their worst week since the 2008 financial crisis. The S&P 500 is off 14% since its Feb. 19 record high. It now sits at its lowest level since October. The Dow just saw its worst weekly point decline ever.
Despite the record losses, Zandi believes Wall Street is dangerously underestimating the magnitude of a recession.
“The general thinking at the moment is V-shaped — that this is a problem here and now. The Fed eases monetary policy, and we’re back up and running pretty quickly. I suspect that won’t be the case,” he said. “The Federal Reserve does not have a lot of room to maneuver… I don’t think policy is up to the task to really juice up this economy to get it going again quickly.”
Before the coronavirus emerged as a risk, Zandi came into 2020 warning investors the economy was not strong enough to sustain the market’s record highs. He believed conditions were ripe for a correction.
Now, Zandi is escalating the call, warning the odds of a coronavirus pandemic have doubled to 40%.
“Valuations were very stretched. Anything probably would have pushed the stock market back on its heels,” Zandi said. “COVID-19 [coronavirus] is more than just something, and that is something very substantive.”
The White House did not provide a statement on Zandi’s comments.