Despite taking a beating last week as cases of the new coronavirus spread rapidly around the world, U.S. markets have yet to price in a full-scale pandemic and subsequent recession, a U.S. equity manager told CNBC Tuesday.
She added that the worst-case scenario of the virus becoming a pandemic with a recessionary impact on the U.S. economy was "not priced in at all by the market right now."
Grant hypothesized that containment measures similar to those exercised in China, involving the widespread shutdown of manufacturing facilities, schools and businesses, could see Columbia Threadneedle analysts' worst-case scenario play out. "You could see a proper contraction of activity and that would be consistent with an average earnings downgrade of about 13% during recession time; that would be consistent with an S&P 500 some 20% lower than where we are today," Grant said, adding that this would be the "outlier scenario."
In the event of a resumption of activity within 12 to 18 months, however, she suggested that this would provide a "pretty nice entry point" and that current investors with a long-term horizon would be better off riding out the market volatility and remaining invested.
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