Tony Dwyer, Chief Market Strategist of Canaccord Genuity, argues that the coronavirus outbreak is putting the US economy on thin ice: "If you close some of these major cities due to business activity, you will face a supply shock, as well as a short-term decline in demand," Dwyer said during CNBC's Trading Nation. "The bond market certainly tells us, especially with the Fed's reaction today, that it is scared."
After the Fed lowered its interest rate by half a percent on Tuesday, the yield on 10-year Treasury bonds fell below 1% for the first time.
"The rate cut was necessary because the market was commanding it," Dwyer said. "You can't close the world's second-largest economy and think that everything will be smooth ahead."
According to Dwyer, although the Fed's rate cut will not prevent a recession, he believes that this is a vital step to preserve the economy. According to him, in the event of a recession, the Fed's proactive actions will set up the economy and the markets on a successful recovery.
Despite the recession warning, Dwyer still predicts that stocks will jump sharply to historic highs. "Now is the time to start looking for options that you would have wanted three, four, five months ago that have the ability to grow as soon as the situation comes out of this fear-based economic crisis."
