Markets plunge, economy “probably already in recession”

Markets fell on Wednesday.

The S&P 500 plunged 5.2 percent, the STOXX Europe 600 tumbled 3.9 percent and the Shanghai Composite fell 1.8 percent.

Oil prices also plunged. West Texas Intermediate crude sank 24.4 percent and Brent fell 14.1 percent.

“I think we’re probably already in a recession. I don’t see any avoiding that on either side of the Atlantic,” said Cameron Brandt, director of research at fund flow data provider EPFR.

Indeed, some analysts see more pain ahead for financial markets and the economy.

Mike O’Rourke, chief market strategist at financial brokerage JonesTrading, described the current situation as “Bearmageddon”.

Bearmageddon is described as a situation when the economy rolls over at a time of “maximum level” of easy monetary policy, while asset values like stocks are still expensive. “That combination of events becomes toxic because investors begin to express concern that the [Federal Reserve’s] monetary policy has become impotent,” O’Rourke wrote in a note.

This was highlighted by the stock market's sharp fall on Monday despite the Fed's announcement of an emergency interest rate cut and quantitative easing the day before.

Yves Lamoureux, president of macroeconomic research firm Lamoureux & Co, sees a series of rolling bear markets ahead.

“I think after 10 years of being on steroids, I’d say this market is very fragile,” said Lamoureux. “The virus was the needle that pricked the bubble.”

Scott Minerd, global chief investment officer at Guggenheim Investments, argued that the US needs a large fund -- upward of US$2 trillion -- to rescue businesses from failure.

Otherwise, the economy faces “the possibility of a downward spiral into something akin to a global recession”.

Late on Wednesday, the US Congress passed the first of two planned bills providing some relief from the economic damage resulting from the coronavirus pandemic while the European Central Bank launched a new, expanded programme to buy financial assets.