A pandemic-driven global recession is becoming more likely by the day as the flow of goods, services and people face ever-increasing restrictions.
In just the past day or so, President Donald Trump curbed travel to the U.S. from Europe, Italy’s government ordered almost every shop to close and India suspended most visas. Twitter Inc. joined the flood of companies telling employees to work at home and the National Basketball Association suspended its season.
While such announcements are aimed at containing the coronavirus, each quarantined city, canceled flight, scrapped sporting event and scuppered conference will hammer demand across the globe this quarter and likely longer. An initial consumer rush to stock up on supplies may be followed by months of cautious restraint.
“The resulting pandemic of fear continues to spread and is bound to cause a global recession,” Ed Yardeni, president and founder of Yardeni Research Inc. wrote in a research note.
Dashed are the hopes from just a few weeks ago that the world economy would track a V-shaped trajectory — a sharp first-quarter slump in growth followed by a second-quarter rebound. Now, the biggest economic shock since the 2008 financial crisis is raising the risk of a worldwide recession, with the debate shifting to how long and deep the slump will be.
Equities and bond yields continued their retreat on Thursday, with the MSCI World Index of stocks now on the verge of a bear market.