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Illustration: Aïda Amer/Axios
In just a matter of weeks, top economists and investment bank analysts have gone from expecting the coronavirus outbreak to have minimal impact on the U.S. economy to warning that an outright recession may be on the horizon.
What's happening: The spread of confirmed coronavirus cases in Europe, the Middle East and the U.S., and the speed at which they are being discovered, has set the table for the outbreak to have a larger and much costlier impact.
Between the lines: The outbreak threatens U.S. consumer-oriented businesses like restaurants, bars and travel, which have held up the economy as business investment has turned negative and the manufacturing sector has fallen into recession, largely as a result of the U.S.-China trade war.
What they're saying: Business investment, which declined through the last three quarters of 2019, could be further hit, Constance Hunter, chief economist at KPMG, tells Axios.
Europe and Japan are particularly at risk, as both have generated only 1% growth over the past year and are very susceptible to falling into recession.
Flashback: Just a few weeks ago, many economists thought the coronavirus would cause only a tenth of a percentage point decrease in U.S. growth this year.
Where it stands: Goldman Sachs' chief U.S. equity strategist David Kostin warned Thursday that the firm now expects U.S. companies to "generate no earnings growth in 2020,” and that “a more severe pandemic could lead to a more prolonged disruption and a U.S. recession.”
Sen. Richard Shelby (R-Ala.) signaled he may support Judy Shelton's nomination to the Fed board, joining Sen. Pat Toomey (R-Pa.) and leaving Sen. John Kennedy (R-La.) as the only undecided Republican on the Banking Committee. (Bloomberg)
Confirmed coronavirus case numbers are falling in mainland China, but rising in South Korea and Japan, and the first case was discovered in Nigeria. (Reuters)
DoorDash has filed for an IPO setting the food delivery company up to go public as soon as late spring. (WSJ)
The White House has directed government health officials and scientists to coordinate all statements and public appearances with the office of Vice President Mike Pence. (N.Y. Times)
In one week, futures traders have gone from seeing virtually no chance of a rate cut at the Fed's next policy meeting to a more than three-quarters likelihood.
Why it matters: Economists aren't sure a rate cut would be effective at offsetting the damage from the coronavirus outbreak, and would put the Fed in a weaker position to bolster the economy should the U.S. fall into a recession.
Details: Markets see significant likelihood the Fed cuts rates three times this year, and sees one rate cut each by the European Central Bank and Bank of England this year.
Be smart: "With Fed rate cut probabilities for the March meeting now at 70% either Powell, [vice chair Richard Clarida or N.Y. Fed president John Williams] need to address the shift in market expectations," RSM chief economist Joe Brusuelas tells Axios in an email.
Yes, but: “The problem with doing monetary stimulus is that it will have limited impact on the effects of the virus,” Jens Peter Sorensen, chief analyst at Danske Bank, tells Bloomberg.
Guggenheim Partners global CIO Scott Minerd tells Axios the fallout from the coronavirus outbreak could be "worse than the financial crisis."
Why it matters: Minerd called out the "cognitive dissonance" in markets as stock prices hit new all-time highs in mid-February, saying in an open letter that he had never "seen anything as crazy as what’s going on right now."
The intrigue: As a member of the New York Fed's investor advisory committee, Minerd says he's been contacted by officials and is expecting a statement regarding "some sort of monetary coordination." This likely means the world's central banks are planning to provide interest rate cuts or additional stimulus.
Unfortunately, Minerd is concerned that the market's demand for action from central banks is misplaced and there is little ammunition available to fight the problem.
Fears about the coronavirus haven't shattered every stock. Look at the telehealth firm Teladoc, Axios' Bob Herman writes.
Driving the news: Teladoc's stock price has soared 19% this week and is now valued at almost $10 billion, because apparently Wall Street believes we will only see doctors on our iPads or on the phone as we avoid the outside world.
Reality check: Teladoc is getting more people to use digital checkups, but the company is not remotely close to turning a profit.
Marian Croak is an executive, engineer and inventor who developed the widespread Voice over Internet Protocol calling system.
Croak currently works as a VP of engineering at Google.