The Dow Could Lose 30% as U.S. Braces for “Greater Depression”

  • The Dow will likely continue falling this week as markets digest the severity of the coronavirus outbreak in the U.S.
  • Data out this week will add to the gloomy picture of a sharp decline in economic activity.
  • Without a coordinated coronavirus response, the Dow could make its way up to 30% lower in the days to come.

The Dow Jones Industrial Average fell meaningfully lower on Friday as coronavirus cases in the U.S. saw a nauseating spike. Dow futures pointed to a lower open on Monday as traders braced for what promises to be a volatile week.

Coronavirus Stimulus Isn’t Enough to Plug the Hole

Reality is sinking in for U.S. financial markets as the health crisis across the nation deepens. Though markets initially cheered the government’s $2 trillion coronavirus relief package, many are starting to question whether it will be enough.

Some argue that the amount is not only too small to support the massive rollback in corporate spending but that the government is distributing it irresponsibly. Only $100 billion is destined for the healthcare sector, which many believe is far too little.

The healthcare system in the U.S. is grossly underprepared for the influx of coronavirus patients | Source: REUTERS/Andrew Kelley

Without the coronavirus outbreak under control, the stimulus is merely treating a symptom of the underlying problem. $100 billion to support an influx of 3 million new patients (in a best-case scenario) simply isn’t enough.

Greater Depression Is Imminent

New York University’s Nouriel Roubini likened the current predicament to a “greater depression.” He thinks it will surpass the hardships of the Great Depression. He argues that the best-case “v-shaped” recovery that some are predicting assumes that countries across the world are enforcing strict lockdowns and tracking COVID-19’s spread carefully.

Unfortunately for the best-case scenario, the public-health response in advanced economies has fallen far short of what is needed to contain the…

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