2020 Outlook Update: Storm Warning (March 16, 2020)

by Bill O’Grady & Mark Keller

Summary—High Probability of Recession:

  1. The economy is facing three simultaneous problems:
    1. A public health crisis—COVID-19 and the economic impact of containing it;
    2. An oil price war and a regional economic slump;
    3. Rapidly rising financial stress caused by (a) and (b) along with underlying unresolved issues.
  2. We estimate the odds of recession are now 80%, although there is a slim chance the economy avoids a recession.
    1. There is very little economic data to confirm the economic slump, but the anecdotal evidence is near overwhelming;
    2. Given the timing of economic reporting, clear evidence of a downturn won’t be available for several weeks;
    3. This report will update our thoughts on how the next few months will unfold.
  3. The content of this report:
    1. An overview of how recessions look compared to expansions;
    2. A discussion of the three threats the expansion faces;
    3. The market impact of these three threats.

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