NEW YORK - The coronavirus outbreak has yet to spread meaningfully to U.S. shores, but fears of it alone have already eviscerated some $2 trillion of American stock market value, setting off a market rout that could stymie consumer spending - even before other economic effects of the disease are felt.
“The tightening of financial conditions I think is really the key game changer in this outbreak,” said Gregory Daco, chief U.S. economist for Oxford Economics. Through Tuesday, the S&P 500 had fallen 7.6% from its record high last Wednesday, wiping out more than $2.1 trillion of value in just four days, a historic loss in paper wealth.
Wealthy consumers, who have large stakes in the stock market and make up a substantial share of consumer spending, could also reduce their spending, said Danielle DiMartino Booth, founder of Quill Intelligence and a past adviser to former Dallas Fed President Richard Fisher. This could lead to reduced sales of luxury goods and lower spending on hotel stays, Booth said.
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