Report
Even if nothing else happens, could the fall in the equity market by itself send US growth falling?
The United States is going to be affected by the fall in global trade and exports, disruptions to value chains and revenue losses, all as a result of the coronavirus crisis. But even if these negative developments did not happen, the mere fall in the equity market caused by the crisis would le a d to a marked weakening of growth in the United States. After examining the effect of market capitalisation on the various components of demand, we estimate that a 10% fall in US share prices reduces GDP by 0.85 percentage point. The 2 6.6 % fall observed in equity market indices may therefore potentially reduce GDP by 2 . 25 percentage points, which would more or less wipe out growth.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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