Steve Rattner's Charts - Coronavirus Re-Ignites Recession Fears _ Morning Joe _ MSNBC

Meanwhile , a perfect storm hit Wall Street yesterday as fears of the Coronavirus collided with a plunge in oil prices .

The dow sank more than 2000 points losing nearly 7.8% its worst day since the 2008 financial crisis .

The S and P lost 7.6% and the NASDAQ almost 7.3 the was so bad that a circuit breaker was triggered minutes after the opening bell which halted trading for 15 minutes .

The plunge in oil prices comes as Saudi Arabia and Russia battle over market share .

The demand for oil has declined because fewer people are traveling due to the Corona virus .

This morning , global markets are now trying to announced .

Our futures are pointing to a more than 800 point surge after the president floated the possibility of a payroll tax cut .

So Steve Ratner , you have charts but before we get to your charts , let's talk a little bit about what happened yesterday .

I don't usually watch CNBC only because I mean , it's a great network , but I , I usually don't watch it because of course , as you know , Willie and I believe in off track betting is Steve Ratner .

There you go .

Ok .

I was just wondering , I was actually talking to a wall here .

Ok .

Uh , so , yeah , we , we do a lot of off track betting .

So , Willie and I don't listen to C NBC .

What it's CO TB , but you have to have a certain cable provider to have that one .

But I was listening obviously and watching , uh , C NBC all day yesterday and it seemed , while the oil , well , sort of the oil wars between Russia and the Saudis caused a lot of the unrest by the end of the day when they were trying to figure out how long this route would go .

People were moving back to the Corona virus and talking about the fact that there's just so much uncertainty that the markets don't know what's going to happen .

They don't know what the bottom is going to be .

They don't , I mean , they have a supply problem , they have a demand problem , they don't know what consumers are going to be doing .

I mean , there were so many questions and , you know , they sort of price this oil war into it now .

It seems all the analysts are worried about the Coronavirus and trying to figure out where the bottom is going to be .

Nobody thinks it's going to be a deep recession that lasts for a year and a half .

But they think it could be a pretty severe recession could happen quickly and be more U shaped what from the analysts you spoke with yesterday on the street and in your business , what what caused yesterday ?

Was it that perfect storm Mika was talking about ?

And if there is a recession , how long do they think it will last ?

Well , of course , the stock market is just another version of O TB , but we try to do it with a few more numbers .

We probably get to about the same probability of success in predicting it .

Look , I think yesterday was a perfect storm of things that came together and they were all related .

Of course , it started with the Corona virus which led as Mika said to a drop in oil demand , which led to a fight within OPEC between the Russians and the Saudis and effectively a collapse of OPEC so that everybody is now pumping as much oil as they can , which led to oil prices collapsing .

And then you also have the fact that the market hates uncertainty .

The market is not used to public health crises .

It doesn't really fancy itself as an expert on public health .

And then you have the fact that frankly , there was an absence of leadership from Washington for a good while and markets hate that they want leadership .

They want the president to stand up and say something .

The president spent the weekend playing golf and spent Monday at a fundraiser in Orlando .

But if we can take a look at the , if you want and I'll show you kind of what happened .

So as Mika said , you had this enormous sell off yesterday , but that brought , that brought the total sell off since the beginning of this event back in February , it brought the total sell off in the S and P to 19% .

And that's 1% short of what we call a bear market .

20% is considered a bear market .

What's also interesting about this sell off is if you compare it to what happened in 2007 when the market began to sell off in anticipation of the financial crisis .

And you can see the small gray dotted line up here .

The sell off in this case has actually been steeper than it was in 2007 .

It has been a record drop in terms of the amount of drop over the period of time it occurred .

Now , also , not surprisingly , it's been concentrated in a few industries that have been most affected by all this and that includes banks , banks get hurt when interest rates go down because they can't make as much money on their loans .

It includes airlines , not surprising because people don't fly as much and it includes energy which has been absolutely decimated by this .

And so if you look at a few of the stocks , for example , United Airlines is down by 40% since its peak Citigroup is down by 34% accidental petroleum just to pick some of the leaders is down by a pretty stunning 71% .

So let's turn then to what this means for economic growth .

So already economists are slashing their forecasts for economic growth .

This happens to be Citigroup's forecasts but you can use anybody you want .

And so you can see that back here for the second quarter , Citigroup was projecting , excuse me , A was projecting a much stronger quarter and now only 1% .

And then in the third quarter , Citigroup was projecting over 3% and it's now projecting 0/4 quarter also cut its projections and so on .

And so you can see that for the year as a whole , Citigroup is now projecting 1% growth this year compared to 2.4% growth that it was projecting just a few months ago .

And so Steve , can I interrupt you here ?

We really , so we look at these projections but these really and I certainly respect the economists who are trying to figure out what's going to happen .

But we have no idea what this epidemic or what this pandemic is going to be .

If it's like Italy , then of course , those numbers will likely be far worse .

If it lasts six months , the numbers will be far worse .

We're still sort of whistling in the dark , aren't we ?

Because we don't know the extent of this Coronavirus .

We've all heard this is not the deadly virus that you know , this ultimate virus that everybody has feared because the survival rate is still fairly high .

It's far , far worse than the flu .

But , but it's not what the deadliest of pandemics that a lot of people have feared is .

But if it gets out of control , then we could be shut down like Italy for six months , then those numbers will be far worse , won't they ?

Sure .

And we can take a look .

It's all probabilities .

Joe , nobody knows for certain .

We're just guessing on probabilities and if you want to look at and of course , if we get on top of it , I'm sorry to interrupt .

I just want to finish that sentence if we get on top of it .

Actually , it may not be that bad .

I mean , the future really is in the hands of our leaders on how quickly and how nimbly they respond to this crisis .

It is .

But the Yin and the yang of that , of course , is that a more aggressive response , shutting down more of the country as Italy is doing is going , would have a bigger short term economic effect .

Italy is going to go into recession .

That is a virtual certainty simply by they're already on the verge of it .

Anyway , the secession of economic activity Trump Trump has been trying to do is have it both ways in a way he's been trying to have business as usual because he doesn't want the country to go into recession .

But he's also now having to recognize the reality .

So let's talk about probabilities and take a look at what the market , what the prediction markets think is going to happen .

And there are other ways to measure this with treasury yields and things like that .

But this is pretty simple .

But if you simply go back before all this started , you can see the market was pricing in a relatively low 20% probability of a recession this year .

And now you can see what's happened in just the last few days where the probability has shot up to 64% of a recession this year .

And again , it's a probability , we don't know .

But I would also say since there are obviously political implications of this , just if there's a recession this year , it doesn't necessarily mean there's going to be a recession before election day .

It doesn't necessarily mean it is going to bring down the Trump presidency .

But there is this distinct , I think a very possibility of a recession , certainly a slowdown .

And right now , I would say the odds are slightly better than 50% of a recession .

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