Opinion | Luck may be the only thing standing between the coronavirus and a US stock market crash
- The slowdown in Chinese manufacturing and ripple effect on global supply chains will hit the global economy hard, even if a recession can be avoided
- If the outbreak cannot be contained by summer, a crash worse than the 2008 crisis awaits America’s inflated asset markets
There is a significant chance that the crisis will last until summer. The economic disruption may pack enough of a punch to pop the biggest global bubble – centred around the US stock market – in modern history.
The coronavirus outbreak appears much more serious and more likely to persist than appeared to be the case just two weeks ago. In addition to disrupting the services sector at an estimated cost of over 0.5 per cent of gross domestic product per week, the manufacturing sector may not be able to get back to normal before at least the end of February.
Disruption in March looks increasingly likely. The longer the crisis lasts, the more likely is a global recession.
Over the past two decades, global supply chains have come to rely on China for cheap components. From automobile and electronics to shoes and garments, sourcing materials and components from China is vital to keeping the global economy humming. If China cannot get back to normal soon, the disruption may push the global economy into recession.