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Get ready for another bumpy ride in global markets as the number of people affected by the coronavirus rises along with the number of fatalities, affecting global supply chains and national health care systems.

Stock markets in Asia recovered from earlier losses, but most major European indexes, except the FTSE 100, were down in Monday trading, portending continued volatility in the U.S. following last week’s 11.5% drop in the S&P 500. The index rose 1.8% to 2,992 in morning trading on Monday. Through Friday, the index had fallen 13% from its peak on Feb. 19 at 3,386, losing $3.6 trillion in market value.

Meanwhile, bond yields continue to slide, following record-setting lows in 10-year and 30-year Treasuries hit last week along with the biggest one-day drop in the two-year Treasury on Friday — all fueling expectations of a Federal Reserve interest rate cut, possibly before the Federal Open Market Committee’s next scheduled meeting on March 17-18.

On Friday, 90 minutes before the market close, Fed Chairman Jerome Powell tried to calm U.S. financial markets while acknowledging their fears: “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity.” He said the Fed “is closely monitoring developments and their implications for the economic outlook” and will take “appropriate” action to support the economy.

That could include a 50 basis-point rate cut, which traders now give 100% odds for at the Fed’s mid-March meeting, according to the CME FedWatch tool.

The likelihood of a Fed cut has increased meaningfully. Depending on the spread of the virus and the market reaction, the Fed could act swiftly and aggressively,” said BofA economists, led by Ethan Harris, in their weekly note. 

BofA economists cut their global 2020 global growth forecast to 2.8%, the lowest reading since 2009, and lowered their U.S. GDP growth forecast to 1.6%, which includes three quarters of a growth recession. “Broken global supply chains will deplete inventories and delay investment. But what worries us more is an adverse feedback loop between consumers and markets.”

The OECD, which tracks the economies of a group of mostly rich countries, slashed its 2020 growth forecast from 2.9% to 2.4%, which would be the weakest growth since 2009.

David Kelly, chief global strategist of J.P. Morgan Asset Management, writes in his latest market note, “While it is impossible at this time to judge the full extent of the damage that will be inflicted by the virus, it is more reasonable to consider how long that damage will last.”

Kelly writes that “the value of a portfolio will largely be determined by what comes next,” after 2020. “This means looking at how well companies and sectors can weather what may be a difficult year but also how they can perform when the virus is no longer an important issue shaping the economic outlook.”

To date, roughly 88,000 have been infected by the coronavirus and over 3,000 have died, most in China, but deaths have also been reported in Italy, South Korea, Iran, Thailand and Australia. Two people have died in the U.S., in Washington state, whose governor declared a state of emergency. The virus has spread to 67 countries and territories.

The World Health Organization says the outbreak has reached the “highest level” of risk for the world, and its director-general has warned the virus could move in “any direction.” The UN recently released $15 million to help vulnerable countries battle the spread of the coronavirus. 

In the U.S., the White House announced additional travel restrictions involving Iran, increased warnings about travel to Italy and South Korea and asked Congress to allocate $1.25 billion in emergency funds that will be added to $1.25 billion in money diverted from other programs. Democrats have called the administration’s funding requests inadequate, and Senate Minority Leader Chuck Schumer released a proposal for $8.5 billion in funding to fight the coronavirus.

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