The virus initially paralyzed economic activity in Wuhan province in China, where it first broke out, but it then disturbed both supply and demand within the rest of China and then outside it. Examples, which are multiplying by the day, include the collapse of sales in China and the decimation of Chinese tourism on the demand side and, on the supply side, the growing disruptions to global supply chains, which could soon force factories to shut down in Europe and elsewhere. Not surprisingly, a growing number of multinational companies are either suspending or reducing their earnings guidance, including Apple, which announced on Monday that it would not meet its revenue guidance because of both demand and supply issues — specifically a decline in Chinese demand and disruptions to the iPhone supply chain.

As long as this dynamic remains uninterrupted, the hope of a V growth recovery will give way to more discussion that the pattern may end up being more of a U, W or L. Should this materialize, the gap between ever-rising prices for risk assets and low volatility on the one hand, and even more sluggish fundamentals on the other, will become even more glaring. And a multiyear rally that once had three powerful engines — attractive valuations, hopes for sustainable better fundamentals and favorable technicals — will rely even more heavily on just one: technicals and, specifically, market confidence in the ability and willingness of central banks to provide ample and predictable liquidity that decouple finance from the real economy.  

Mohamed A. El-Erian is a Bloomberg Opinion columnist. He is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. He is president-elect of Queens' College, Cambridge, senior adviser at Gramercy and professor of practice at Wharton. His books include "The Only Game in Town" and "When Markets Collide."

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