The first scenario: Things get better by March, production is restarted in China, and the disruption is contained to the first quarter. In this scenario, U.S. economic growth dips to 2.5% in the first half of the year but picks up, the research analysts wrote.
The second scenario? Escalation and more disruption in the second quarter. In this case, the virus peaks in May, growth in the first half of 2020 goes to 2.4% – the weakest since the financial crisis – and third quarter sees things picking back up.
The worst and third scenario: The virus persists into the Q3. This scenario, analysts wrote, would escalate the risk of a recession. It would affect all large economies. Corporate profits get hit hard and credit risk for corporations spikes. In Europe, scenario 3 would cause an “outright recession,” according to the analysts. China would see growth of 6.1% in Q1 and the U.S. would have a “soft pickup.”
In the U.S., there would also be a temporary rise in unemployment of almost 200 basis points, or 2 percentage points. The Fed would keep cutting rates, and aggressively in 0.5 percentage point increments.
For this scenario, no medical solution would be in place yet, though there’s currently a drug in trials from Gilead (GILD) that could stop transmissions.