The mainstream conventional wisdom is now that we will have a two quarters rolling global recession, in Q1 led by China, Japan, Korea, Italy and a few other weak EM, and in Q2 led by US and Eurozone.
However my view is that this will be more than a 2 quarters rolling recession. It is highly likely that most of the Eurozone and even the US may be in a recession already in Q1, not just Q2. And it is likely that the E7 & US and other G10 recession will spillover from Q2 into Q3
We will for sure have a global recession. My early out of consensus view that we will get a recession is now mainstream & conventional wisdom as PIMCO, JP Morgan, the ever permaoptimist Ed Hyman & other sell & buy side leading firms are all in the rolling global recession camp!
Whether we get a 2 quarters global rolling recession or at least a 3 quarters one now depends on the epidemiology and on the strength of the policy response, especially the fiscal one.
On the health side, Europe & US are unlikely to see peak contagion in 3 months the way that China did given as draconian China style quarantines/etc will not be politically feasible till is too late, a in Italy. Thus is more likely that we get a 3 qt recession if not a longer one
On the policy response side, central banks will ne nimble and be very aggressive and moving fast. But this recession is a collapse of aggregate demand - so far stronger and deeper than the 2008-09 GFC - and it requires a bigger fiscal response and stimulus than in 2008-09.
But with few exceptions we have less fiscal space & political gridlock in some countries (such as US) implying that fiscal stimulus will initially be more limited than desirable. Thus risk that this becomes a 3 quarters recession or longer & 1 that is shorter but deeper than GFC
CBs are NOT running out of policy bullets even if the monetary policy headroom is more limited than in the GFC. The playbook for all CBs is first conventional easing, then ZIRP, then Forward Guidance, then NIRP...
..then NIRP for most G10 CBs (Europe & Japan already there & not yet at reversal rate, Fed & BoE will not go to NIRP). Next QE, credit easing, purchase of other private assets (including corporate bonds & eventually equities). Also see others some going to YCC, like BoJ did.
CBs will also deploy - as in the GFC - a wide range of other liquidity and credit support facilities for banks, non-bank financial institutions and even non financial private sector to avoid seizures of liquidity and insolvency of solvent but illiquid agents.
