Worst-case scenario worries are back for stocks after Fed move falls flat

NEW YORK - They bought the rumour, sold the news, and now investors are back to their real obsession: imagining what a recession looks like in equities from the coronavirus. It's not a pretty picture.

At the heart of the problem are feedback loops, many of them emanating from markets themselves. Headlines hit, shares tank, nerves fray, travel is canceled. Shares fall more. And while dynamics like those are always what derail rallies, it makes the challenge of visualizing the future no easier or less urgent.

Earnings among S&P 500 companies are projected by analysts to rise about 7 per cent in 2020, but few investors expect that to happen. A number of companies have already warned the virus will have a material impact on their bottom lines. Not many have specified what. Analysts at Citigroup cut their full-year earnings forecast, citing supply chain issues, demand weakness and lower commodity prices. US companies will see earnings of US$164.25 in 2020, down from a previous estimate of US$174.25, according to Tobias Levkovich, chief US equity strategist at the bank.

It's the latest in a string of pronouncement from Wall Street strategists, who have rushed to map out potential scenarios. Strategists at Goldman Sachs last week predicted zero profit growth for the year, saying that a looming recession could mean the S&P ends the year down 28 per cent from its recent February high.

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