Corporate debt markets look vulnerable.
Probability of a recession priced into asset classes at end of February
Source: JPMorgan, prices at 29 February 2020
February saw concerns over coronavirus go truly global, as cases emerged across Europe and the US, shattering the illusion that this was an infection limited to China.
Whilst public safety and containment of the outbreak must clearly be the primary concern, for financial markets the key question is will the virus cause a recession?
It is no longer a question of whether coronavirus will have an economic impact – you only need to watch the news of school closures, cancelled flights and public events to see this.
What matters now is will the impact be short-lived and can lower interest rates encourage a rapid recovery in confidence and business activity?