Illustration: Eniola Odetunde/Axios
In its latest repricing of the economy, the market sees the now-expected global recession caused by the coronavirus outbreak morphing into an economic depression unlike any the world has seen in generations.
The big picture: Bankers and traders are looking to sell everything that isn't nailed down to boost cash positions and hunker down for the worst.
What they're saying: JPMorgan wrote down its expectations for global GDP to -1.1% in 2020, expecting the world's economic growth will reverse for the full year, including a second quarter contraction of -14% in the U.S. and -22% in the eurozone.
- Deutsche Bank economists foresee a "severe global recession occurring in the first half of 2020 ... quarterly declines in GDP growth we anticipate substantially exceed anything previously recorded going back to at least World War II."
- Both banks noted their forecasts are based on governments putting in place massive, yet-to-be-passed fiscal stimulus programs and fairly swift containment of the outbreak.
- "It is easy to imagine a still worse outcome," DB analysts, led by head of economics research Peter Hooper and seven chief economists, wrote.
The most dire warning came from Pershing Square Capital Management CEO Bill Ackman, who went on CNBC to beg President Trump to shut down the U.S. economy for 30 days and put the country in a nationwide lockdown.
- "Until a vaccine is manufactured, distributed and injected we will go through a Depression-era period in the country," Ackman said. "America will end as we know it unless we take this option."
What's happening: Even traditional safe havens were not seen as safe enough during Wednesday's selling.
- Gold dropped by 3% and U.S. and German government debt, viewed as the safest bonds on earth, were sold despite a 5% decline on the S&P 500 and a rout that saw WTI crude oil prices fall 14% and crash below $22 a barrel.
The last word: "What people are doing is looking at things that they can sell to raise cash, and that’s part of the crisis market situation," Jim Caron, head of fixed income global macro strategies for Morgan Stanley Investment Management, told CNBC. "When these things happen, people sell what they can sell, not what they want to sell."