According to the star economist, it could drop 30 percent in the stock markets.

Many remember the period after the 2008 economic crisis as the Great Recession, the coronavirus epidemic and, due to its economic effects, the recession could be even greater than a decade earlier. Renowned economist David Rosenberg warned of this.

Monday’s analysis by Rosenberg Research predicts several scenarios for the U.S. economy: the baseline scenario is that the economy will reopen intermittently in May, but the number of coronavirus infections will destabilize consumers and buyers will spend with less confidence than before the crisis. In this scenario, the development of a coronavirus vaccine is not expected, but treatment is expected to be developed over the next six months to alleviate the worst respiratory symptoms caused by the disease.

What does all this mean for the economy and capital markets? Real GDP will decline by thirty percent in the second quarter, consumer prices will fall for five quarters, and the analysis shows that the unemployment rate will rise to 14.2 percent by the end of 2020. The stock market will hit its lowest point. in the second quarter, with the S & P500 falling to 2,000 points, followed by a slow increase. Although small, Rosenberg expects an average of 2,600 S & P500 points in 2021. So Rosenberg assumes that the stock market could drop 30 percent in the coming months. The S & P500 was down 10.9 percent this year.

Based on the optimistic scenario in the analysis, based on the release of coronavirus treatment or the vaccine for the next 6 to 12 months, it is assumed that the unemployment rate could average around 9 percent, while the S & P500 could reach its low about 2,500 points in the second quarter.

The worst-case scenario described in the analysis does not anticipate the emergence of a coronavirus vaccine or treatment and assumes that a second wave of the epidemic will occur next winter, severely depriving households and businesses of confidence. percent and the indicator would move around an average of 17.5 percent in 2021. Also in this scenario, Rosenberg assumes that the Fed would cut interest rates in negative territory. However, the stock markets could plummet, with the S & P500 hitting a new low of 1,800 points in the second quarter.

(MarketWatch)

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