In light of the recent coronavirus attack in China, the hardest hit sector is the entire manufacturing unit of the country. The production stoppage in the industrial section is pushing the global supply chain to disruption and creating losses. Experts believe that the struggle for China will at least last his entire month. The sudden rise in coronavirus cases showcases the fact that the impact will move into March and is certainly enough to put the global economy into recession. In sharp contrast to just 2 weeks prior today, the coronavirus outbreak wasn’t looking as grave as it looks now.
The Crisis surely looks like extending in March and that will be enough to drive the economy into recession. Over the past few decades, the global economy has been extremely dependent on China for cheap components (fashion, electronics, and technology). Sourcing of these from China is essential to keep the global economy on track. If China fails to produce soon, the entire economy will be derailed to an extent.
The US stock market bubble will pop when the economy will hit it so hard due to the lack of production from China. Back in 2008, such a bubble burst did happen and the results are well to one and all. This time around the US Federal Reserve appears to be hell-bent to offer relaxation into the market and increase their debt leverage to keep the economy and stock market at a better place. The entire US asset market is super inflated and the benefit is being picked by those involved in it. It is nothing but the support from the Fed that has kept it stable but at the same time, it is to be understood that once this bubble is popped, the economy is going to be worst than it was in 2008.
The coronavirus outbreak will only diminish with the coming of summer and till that time at least 2 quarters will be passed for the major MNCs. You can only think of the impact of such dormant quarters of MNCs on the global economy, horrifying right? Mass hysteria is awaited due to the constant crisis in the market and coronavirus is rightfully regarded as the Black Swan event. Big tech companies are the center for the US Stock market and if they fail to run in the long term, it is quite understandable why the market will directly head towards recession.
Any decision taken by investors needs to be well planned. Having liquid cash in hand is the need of the hour for all.