Besides the liquidity question, Normand and Manicardi highlighted the length of the next downturn as a critical unknown in gauging how bad things will get. The longer a recession lasts, typically the bigger the hit to markets, their analysis of past episodes shows.
“The recession’s duration is a powerful drag on returns, which should dovetail with some readers’ concerns that policy makers lack the necessary monetary and fiscal space to extract economies from the next recession,” they wrote.
This article was provided by Bloomberg News.