While the markets have slightly rebounded after the shock of the coronavirus outbreak, the effects of the crisis could ripple across industries, ex-Fed insider Danielle DiMartino Booth believes.
After sliding to the lowest close in over a week on Friday over the spread of the deadly virus, US stocks rebounded slightly as the new trading week began, with the key Dow Jones Industrial Average index climbing over 200 points on Tuesday. However, the markets could still grossly underestimate the consequences of the outbreak and are just hinging on the Fed’s injections, says former Fed insider Danielle DiMartino Booth.
“The markets are woefully underestimating the important economic impact globally of what this [outbreak] means given that we started the year leaning on multinationals to charge out of the US earnings recession and leaning on Germany to come out of its own industrial recession. That’s not going to happen either,” she told RT’s Boom Bust.
Booth explained that the companies which were set to lead the US out of the earnings recession are highly dependent on revenues and profits from overseas. The coronavirus could easily impede this, but the markets may still “press towards all-time highs, because they’re saying this bad news is good enough that it’s going to actually cause [the] Fed’s liquidity injections to grow.”