How Covid-19 could drag America into recession
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How Covid-19 could drag America into recession

America’s record-long growth cycle has gone through the US-China trade war, the tsunami in Japan and plunging oil prices.

The global health crisis is threatening to extinguish America’s biggest bright spot, if not the world’s.

Many analysts fear that the fear of an epidemic in the US will change this, creating a new shock to the global economy and threatening growth momentum in the US.

People walking on the streets of New York City.

This risk has caused global investors to panic in the past few sessions, causing the DJIA index on the US stock exchange to lose nearly 2,000 points, equivalent to 6.5% this week.

This week, Zandi raised its forecast for a US recession in the first half of the year from 20% to 40%.

For many American companies, the epidemic has caused them enough damage.

Until recently, health officials and economists thought the epidemic was mostly limited to China.

`If just one outbreak appears in a commercial center or conference, people’s behavior will change quickly,` said David Kotok – President of Cumberland Advisors.

`I still hope the epidemic does not break out here. But two weeks ago, Korea and Italy did not think this would happen,` he said.

However, the good news is that the US economy is still quite prosperous so far.

The US retail industry also remains cautiously optimistic.

Goldman Sachs has lowered its forecast for US growth in the first quarter, to 1.2%.

Last weekend, US Treasury Secretary Steven Mnuchin said they would have a better assessment of the impact of the Covid-19 epidemic on the economy in the next three or four weeks.

In a press conference yesterday, US President Donald Trump also affirmed that the risk of nCoV in the US is `very low`, because the US government has taken many early countermeasures, such as restricting travel with Chinese people.

On February 25, the US government submitted to Congress a plan to spend an additional 2.5 billion USD to develop vaccines, increase national reserves and essential equipment to cope with the epidemic.

The latest data also shows that American consumers are not afraid of the recent developments of the epidemic.

However, this could change quickly according to recent news and the decline in US stocks.

Investors are expecting the US Federal Reserve (Fed) to once again come to the rescue with loosening monetary policy.

However, the Fed does not have many tools left to deal with the epidemic.

`This is a fire hose that is not adequate for a fire. If we really fall into a recession, and Covid-19 is a pandemic, the Fed will run out of space very quickly,` Zandi warned.

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